California’s cannabis legalization strategy has failed to knock out the state’s entrenched black market cannabis sales, and countless consumers are still turning to illicit California dispensaries.

High taxes and the presence of black market dispensaries are cutting into the projected tax revenues for California’s cannabis industry. In a state that was promised billions in tax revenue, the latest projections fall considerably short of expectations. “A projected windfall of tax revenue was a major selling point for legal cannabis in California,” reported the Los Angeles Times. According to the latest state budget documents, California is now expecting a US$223 million shortfall in cannabis tax revenue through June 2020.

Industry insiders are attributing the loss in projected revenue to high taxes and strict licensing regulations that failed to incentivize consumers to turn away from black market sources.

“That’s the thing about California,” said Tom Adams, Managing Director at BDS Analytics. “It was the most loosely regulated medical market ever, and turned into one of the most tightly regulated adult-use markets ever, and the highest-cost adult-use regulatory regimes, so you saw the market shrink in its first year.”

What’s sustaining California’s illegal cannabis market?

Much of California’s black market blues can be traced back to the high tax rates imposed by state regulators and local municipalities on cannabis products. The lack of licensed retail stores has made matters worse, providing black market operators with an opportunity to compete based on convenience.

Under California’s new cannabis tax scheme, consumers are paying as much as 45 percent in taxes on their cannabis purchases. That includes a 15 percent excise tax on recreational and medical cannabis sales and a cultivation tax on growers that amounts to US$9.25 per ounce of flower or US$2.75 per ounce of leaves. In addition, local municipalities can tack on taxes of 5 to 15 percent on sales and cultivation. With noticeably higher price tags, legal cannabis retailers are finding themselves increasingly undercut by a thriving black market as consumers look for cheaper, more readily available products.

“The fact is consumers don’t know that they’re going to an illegal store. They don’t know who has licenses and who doesn’t, so consumers are being duped into going into illegal dispensaries because the pricing is cheaper,” Corey Mangold, CEO of Orchid Ventures (CSE:ORCD,OTC Pink:ORVRF), told the Investing News Network (INN). Orchid’s premium vape brand has developed a loyal consumer following, with its product lines currently sold in more than 250 dispensaries across California and Oregon. The company has expansion plans targeting Nevada, Washington, Michigan, Florida and Massachusetts.

Municipalities refusing cannabis retail licenses are placing another strain on growth in the legal market. For comparison, consider the cannabis retail landscape in Colorado. California’s population size is six times that of Colorado, which has 562 licensed cannabis stores to California’s 620 licensed stores. Consumers in California’s underserved areas inevitably turn to black-market retail shops, which are estimated to number more than 1,000 in Los Angeles alone. Many of these stores were legal before the new legislation came into effect and they have not yet complied with the new licensing regulations in an effort to avoid the taxes and higher costs faced by licensed cannabis stores. These illegal stores are now flying under the radar and undercutting legal dispensaries with lower prices.

California dispensary struggles

The inability to displace the black market could have negative consequences not only for the legal cannabis industry in California, but the entire country. The fact that the state is raking in far less revenue than expected from recreational cannabis sales may dissuade other states from taking the plunge into legal cannabis, ultimately stalling projected growth in the overall US legal cannabis market.

Across the United States, total recreational cannabis sales in 2018 increased by 16 percent to US$9.8 billion, according to a report by BDS Analytics and Arcview Market Research, compared to the 35 percent growth that occurred from 2013 to 2017. “The main reason for the slowdown was the troubled launch of adult-use sales in California on January 1, 2018,” said the report. This slowdown in growth can have a ripple effect throughout all levels of the industry.

“The black market hurts the industry in many ways, the first of which is financial,” said Mangold. “The legal cannabis industry is backed by institutional and private investors that have sunk billions of dollars into the sector. When consumers purchase from the black market, that money goes to companies that are not paying taxes or offering employees livable wages and health benefits. Secondly, purchasing cheaper cannabis products from black market sources can come at a cost to consumer safety. Black market products aren’t tested for pesticides or residual solvents, both of which can be extremely harmful and even fatal.”

Under California law, all cannabis products, such as flower, concentrates and edibles, must undergo strict consumer safety testing by independent labs. Illegal products sold at unlicensed dispensaries are unlikely to have been tested by state standards and could be tainted with mold, pesticides, heavy metals and even fecal matter.

“When you buy flower from legal cannabis growers you know it is pesticide and heavy metal free and of the highest quality,” Paul Chow, co-founder and director of vertically integrated cannabis company Next Green Wave (CSE:NGW,OTCQX:NXGWF), told INN. “Everything is tested and you can see for yourself the breakdown of every plant, including the harvest and shelf dates.”

Licensed cannabis companies have raised concerns to state officials about threats to consumer safety and loss of revenue to illegal dispensaries, along with what they see as a perceived lack of action against the illicit cannabis trade.

Legal cannabis expected to survive

In late June, California launched a three year, US$1.7 million public information campaign known as “Get #weedwise” in an effort to encourage cannabis consumers to purchase safety-tested products from licensed sources. Bureau of Cannabis Control Chief Lori Ajax said, “(The campaign) will directly impact consumer safety by clarifying that only cannabis purchased from licensed retailers has met the state’s safety standards.”

The campaign includes ads on social media sites and billboards driving home the point that illegal cannabis products pose a risk to health and safety. “Do you know what’s hiding in your counterfeit edibles?” asks one ad. “Does your oil have something to hide?” reads another. The ads also include a call to action for cannabis consumers to visit the state’s online database,, where they can make a quick check to ensure they are shopping at a licensed dispensary.

Supporting legal retailers and keeping their products out of unlicensed shops is one way California cannabis brands can differentiate themselves and gain an advantage in this evolving marketplace. “Many of the major brands can be found inside the illegal stores,” said Mangold. Orchid Ventures’ vaporizers and premium cannabis oils are not among those products sold in illegal shops. “Those companies that take the moral high ground and don’t sell into the black market will ultimately gain the respect of legal retail outlets, government officials and agencies, and eventually the consumer. Enabling the black market doesn’t benefit an industry that’s trying desperately to erase the past of prohibition.”

The California Bureau of Cannabis Control’s “Get #weedwise” campaign is a part of a larger effort to send a message to black-market stores and growers that if they continue to sidestep state law, they will be shut down. Agency spokesman Alex Traverso says the state’s plan to fight the proliferation of black market cannabis includes enforcing cannabis regulations via shutdowns of illegal stores and grow operations, and expediting business license applications for those that opt to go the legal route.


California has not seen the billion-dollar cannabis bonanza its budget office anticipated, but the demand is there. The recreational market is still in its infancy and the road to a more mature industry has involved some significant obstacles. As the state’s leaders get more serious about stamping out black market sales, cannabis companies that eschew illicit shops could be better positioned to capture market share in the legal industry.

This article was originally published by the Investing News Network in July 2019. 

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

Progressive Planet Solutions Inc. (TSXV: PLAN) (“PLAN” or “Progressive Planet”), announces that, further to its news releases dated December 22, 2020 and January 7, 2021 the Company has closed its non-brokered private placement financing comprising of 7,500,000 units, at $0.10 per unit, for total gross proceeds of $750,000 .

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 Revive Therapeutics Ltd. (” Revive ” or the ” Company “) (CSE: RVV) ( USA : RVVTF), a specialty life sciences company focused on the research and development of therapeutics for medical needs and rare disorders, is pleased to announce that is has entered into an agreement with Canaccord Genuity Corp. and Leede Jones Gable Inc. as the co-lead underwriters (collectively, the ” Underwriters “), pursuant to which the Underwriters have agreed to purchase, on a bought-deal basis, 20,000,000 units (the ” Equity Units “) at a price of $0.50 per Equity Unit for gross proceeds to the Company of $10,000,000 (the ” Offering “).

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The Australian cannabis market has been maturing since medical marijuana was federally legalised in 2016.

The next year, Food Standards Australia New Zealand legalised low-THC hemp food for human consumption in Australia. The country went on to legalise medical marijuana exports in 2018, allowing medicinal marijuana products developed in Australia to be exported to licenced recipients in countries where the drug is legal.

Recreational cannabis remains federally illegal in the country, but recent legislation shows the door may be opening. In 2019, the Australian Capital Territory passed a bill allowing for the possession and growth of small amounts of cannabis for personal use. The law went into effect on January 31, 2020.

More recently, in late 2020, the Therapeutic Goods Administration greenlit the sale of low-dose cannabidiol (CBD) through over-the-counter methods without a prescription. The ruling from the Australian regulatory agency is expected to officially come into effect in February 2021.

With these and other changes in the works, Australia’s cannabis industry is projected to have long-term potential. The legal cannabis market in Oceania is expected to be worth US$1.55 billion by 2024, with Australia accounting for 79 percent of the region’s market, Prohibition Partners forecasts.

According to a study from FreshLeaf Analytics, the value of the medical market in Australia reached AU$95 million in 2020, and the firm expects revenue to jump again to over AU$150 million in 2021. In short, Australia’s role in the global cannabis industry will certainly continue to grow.

Here the Investing News Network profiles 10 ASX cannabis stocks with market caps between AU$30 million and AU$225 million. All ASX cannabis stocks below are listed in order of market capitalization from largest to smallest, with data compiled using TradingView’s stock screener on January 12, 2021.

1. Creso Pharma (ASX:CPH)

Market cap: AU$209.83 million

Creso Pharma was the first company to import medical cannabis into Australia and the first to launch these products in Switzerland for people, as well as animals. The cannabis company’s anibidiol product was the first hemp CBD complementary feed in animal health thanks to a partnership with Virbac Switzerland. Creso Pharma has also launched cannaQIX in Switzerland; it was the first CBD nutraceutical in human health.

The company’s medicinal cannabis product lines cover therapeutics, nutraceuticals, animal health, lifestyle and topicals.

2. Cann Group (ASX:CAN)

Market cap: AU$176.84 million

Cann Group provides a range of medicinal cannabis products for patients in Australia and globally. In 2017, the company was granted Australia’s first cannabis research licence, as well as the first medicinal marijuana cultivation licence. Cann Group partners with leading medical scientists in Australia to research and harness the therapeutic potential of cannabinoids, terpenes and other bioactive constituents of cannabis.

The company has secured supply agreements in global cannabis markets, including the UK, Germany and other European segments.

3. Incannex Healthcare (ASX:IHL)

Market cap: AU$166.42 million

Incannex Healthcare is a clinical-stage cannabinoid medicine company with global export capacity. It has four clinical programs underway for the development of a variety of cannabis medicinal products aimed at major unmet medical needs, including obstructive sleep apnea, traumatic brain injury/concussion, sepsis-associated acute respiratory distress syndrome and temporomandibular joint disorder.

In 2020, the company worked to advance its clinical trials. By the second half of the year, cannabinoid products accounted for Incannex’s entire revenue stream.

4. Botanix Pharmaceuticals (ASX:BOT)

Market cap: AU$131.37 million

Botanix Pharmaceuticals has a product pipeline that includes three advanced clinical programs using synthetic cannabidiol for the topical treatment of serious skin diseases and for antimicrobial applications. The company also has an exclusive licence to use a proprietary drug-delivery system called Permetrex for direct skin delivery of pharmaceuticals.

Botanix Pharmaceuticals’ programs are focused on treating acne, rosacea, atopic dermatitis and microbial infection. The company secured a clear development path for its BTX 1801 synthetic cannabidiol antimicrobial product after the successful completion of a pre-investigational new drug meeting with the US Food and Drug Administration.

5. Althea Group Holdings (ASX:AGH)

Market cap: AU$114.2 million

Althea Group Holdings takes the concept of medical cannabis a step further with its work as a pharmaceutical-grade cannabis supplier. In addition to offering relief through accessible medical cannabis, the company is implementing components of the plant in its research on advanced drugs.

Althea has successfully expanded into the global cannabis market with a wholesale supply agreement to import a range of Althea-branded finished products for sale and distribution in South Africa beginning in Q2 2021. This agreement came on the heels of the news that the company is slated to become the first commercial supplier of Australian medicinal cannabis extract products to the German market, with all necessary licences for sale and distribution granted by the German government.

6. Zelira Therapeutics (ASX:ZLD)

Market cap: AU$113.79 million

Zelira Therapeutics’ efforts are on unmet clinical needs and on using medicinal cannabis to treat a range of diseases and disorders. Its most common target areas include pain, anxiety and sleep.

Zelira is largely focused on developing treatment options using plant-based medicinal marijuana, and currently has three clinical-stage programs with a focus on insomnia, autism and opioid reduction. The company is also conducting a pre-clinical research program to test cannabinoids in breast, brain and pancreatic cancer.

7. Medlab Clinical (ASX:MDC)

Market cap: AU$75.51 million

Medlab Clinical is a medical research and development company focused on novel biotherapeutics such as nutraceuticals and pharmaceuticals. The company is also developing pharmaceutical cannabis products.

In early 2020, Medlab Clinical launched the NanaBis Observation Study in Australia. NanaBis is a cannabis-based pain treatment drug that may prove useful as an alternative to opioid medication. It is also being used to investigate cancer pain management.

8. BOD Australia (ASX:BDA)

Market cap: AU$49.25 million

BOD Australia is focused on cannabis and hemp-related products. It develops, distributes and markets health and skincare products created using plant-based extracts in Australia. The company secured a foothold in the European cannabis market in 2020 with a AU$200,000 purchase order for four Swiss-branded hemp seed oil products to be sold in France, the Netherlands and the UK.

BOD Australia’s reach in Australia ranges from selling prescription and over-the-counter products to more than 1,000 outlets, such as pharmacies, retail stores and healthcare chains. It also has distribution agreements with two pharmacy wholesalers in Australia.

9. IDT Australia (ASX:IDT)

Market cap: AU$42.47 million

One of Australia’s oldest listed life science companies, IDT Australia is a pharmaceutical manufacturing company with extensive experience in the development and production of pharmaceutical products. Through its GMP-compliant facilities, the company provides full-scale services for new drug development, plus scale-up and commercial active drug manufacturing for local and international clients.

IDT Australia’s clients include Cann Group; IDT Australia is the manufacturer of the medical cannabis products that are a part of two of Cann Group’s export supply agreements with European and UK partners.

10. MMJ Group Holdings (ASX:MMJ)

Market cap: AU$31.04 million

MMJ Group Holdings has a wide range of cannabis investments, including healthcare products, technology, infrastructure, logistics, processing, cultivation, equipment, retail and research and development.

Among other companies, it has invested in Harvest One Cannabis (TSXV:HVT,OTCQB:HRVOF), which develops health and wellness products; Fire & Flower Holdings (TSXV:FAF,OTCQX:FFLWF), a recreational cannabis retailer that’s developed a variety of cannabis products and accessories; and MediPharm Labs (TSXV:LABS,OTQQX:MEDIF), a cannabis extraction company that received its cannabis oil production licence from Health Canada in 2018. MediPharm Labs has launched cannabis extraction services in Australia.

Investor takeaway

The presence of these ASX-listed cannabis companies shows that the cannabis industry in Australia is undoubtedly growing, as are investment opportunities in Australia’s cannabis industry. While recreational marijuana remains illegal in the land down under, the medical cannabis industry is thriving, making that side of the sector worth considering.

So far, Australia has no timeline attached to the legality of recreational use of marijuana, but it will be a story to watch over the coming years for those interested in the space.

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Legal cannabis is spreading. According to a new report by Grand View Research, the global legal marijuana market is expected to reach US$73.6 billion by 2027 with a compound annual growth rate of 18.1 percent.

A survey of over 1,000 US consumers found that the modern cannabis user is largely representative of the general population. Moreover, cannabis consumption today blurs the lines between strictly recreational or medical. In fact, more than 50 percent of consumers report using cannabis for both purposes. As THC and CBD products make their way into an even wider array of product categories, our frame of reference for the modern cannabis user will continue to evolve.

In 2019, the medical cannabis market took home a leading revenue share of 71 percent, driven by the widespread adoption of cannabis as a pharmaceutical alternative for a wide range of conditions, including cancer, arthritis, Parkinson’s disease and more. A growing need for effective pain management therapies is expected to boost product demand even further.

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Khiron Life Sciences Corp. (TSXV:KHRN) is a vertically-integrated medical cannabis company fully licensed to conduct its core operations in Colombia.Send me an Investor Kit

Major telehealth platforms in the medical cannabis industry

Telehealth represents the intersection between innovative technology and the forefront of medical science. While remote medical practice saw its beginnings more than half a century ago, recent technological advancements have connected more patients to physicians than ever before.

In the US, platforms like NuggMD and IndicaMD provide patients with an online medical cannabis card that enables remote purchase of the drug. Patients can meet with physicians over secure video chat and can be approved to access cannabis within minutes. Physicians typically follow-up with patients by email, recommending the types of cannabis that would best alleviate their ailments and ensuring that they don’t purchase the wrong products. Other platforms exist to oversee the rapid delivery of cannabis and hemp products to patients across participating states.

Other parts of the world are undergoing the same transition. It has been more than eight years since Colombia — a country that represents more than a quarter of the world’s total export quotas — decriminalized the possession of small amounts of the drug, and roughly four years since the country legalized medical cannabis. In 2019, Colombia’s Constitutional Court overruled a ban on the public consumption of cannabis, which many considered a stepping stone toward full legalization. Recently, Colombia became one of the first countries in the world to extend national health insurance for patients requiring medical cannabis as a first-line therapy.

Khiron Life Sciences (TSXV:KHRN) was the first firm in Colombia authorized to sell both high and low THC formulations of medical cannabis. The company owns a telehealth platform that has accounted for over 5,600 medical cannabis prescriptions issued to date. Additionally, in June 2020 the company’s Doctor Zerenia telehealth platform was responsible for 14 percent of Khiron’s total medical consultations.

Since becoming the first company to fill medical cannabis prescriptions in Colombia, Khiron reports that 92 percent of its patients have experienced a marked improvement in their primary condition after four months of treatment. In light of these results, the Government of Colombia issued a directive that Khiron’s medical cannabis products and clinic services be covered by the country’s major health insurance providers. While countries such as Germany and the Czech Republic have taken similar legislative actions, a key difference in Colombia is that cannabis is considered a first line therapy with a vast array of applicable medical conditions. With more than 94 percent of Colombia’s population carrying health insurance policies, Colombia is quickly becoming one of the most favourable jurisdictions in the world for patient access; moreover, it has been shown that patient uptake is significantly increased by insurance coverage.

The next step forward for telehealth platforms includes opportunities such as virtual patient education and the fast, reliable delivery of essential drugs such as medical marijuana. Virtual care is also expected to expand across different types of patients, including those requiring intensive care. In the wake of the COVID-19 pandemic, many long-term care facilities have already adapted remote patient monitoring to maintain the safety of staff and patients.

The focus: Accessibility and improving patient outcomes

Medical marijuana has the power to improve patient outcomes across demographics. In the wake of groundbreaking research, patients, physicians and retailers are working together to increase the drug’s accessibility for patients who require relief from a range of health conditions. Telehealth platforms have been instrumental in not only increasing accessibility to medical marijuana, but also in improving quality of life across diverse populations of people.

A recent study completed by Canopy Growth (NASDAQ:CGC,TSX:WEED) in November 2020 found the absence of long-term toxicity despite long-term usage of CBD in a preclinical model, supporting the advancement of recent initiatives aimed at discovering CBD’s full range of therapeutic benefits. While CBD and tetrahydrocannabinol (THC) offer many of the same benefits, high levels of THC are responsible for most of cannabis’s psychoactive effects.

While the chronic pain segment dominated the medical cannabis market in 2019, application toward mental illness is expected to witness the fastest growth over the seven-year forecast period. Worldwide, a growing number of people suffer from depression, anxiety and other debilitating mental conditions with few low-risk pharmaceutical alternatives.

Medical cannabis is also becoming more popular among older adults. A recent study highlighted that cannabis use among individuals aged 65 and older has been steadily increasing, a trend that is consistent with reports from physicians who recommend cannabis in their daily practices. In the face of growing public acceptance and reduced stigma, we are beginning to see an increasing number of older adults rely on cannabis for relief against chronic pain, insomnia, neuropathy, anxiety and other conditions that traditionally call upon pharmaceuticals.

Much of the momentum in the medical cannabis market can be owed to the rise of telehealth platforms and health digitization efforts, increasing ease of access and promoting transparency. Over the next decade, legalization, increased awareness and the rise of remote medicine are expected to facilitate growth, creating lucrative opportunities for market stakeholders.


Telehealth platforms represent one of the easiest ways for patients, providers and retailers to collaborate remotely and fulfill needs faster. As more physicians and policymakers begin to recognize digital health tools as an advantage for maximizing efficiency and safety in health care, existing medical cannabis platforms are well-positioned to take advantage of a large-scale digital transition.

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 BioHarvest Sciences Inc. (CSE: BHSC) (the “Company” or “BioHarvest”) invites its shareholders and the general public to join a Live Video Conference (“Webinar”) on Thursday, January 21st, 2021 at 2:00 PM Eastern Standard Time (11:00 AM Pacific Standard Time). Ilan Sobel, CEO of BHSC, will host the event and discuss progress on Bioharvest’s Growth Plan, which will include highlights of the 2020 milestones achieved, key business capabilities built, and will provide an important overview of 2021 Priorities.

The presentation will be approximately 35 minutes, followed by a live question and answer session.

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