An ongoing list of licensed New York cannabis dispensaries that are more than 30 days past due on their bills to suppliers had just two names on it as of Aug. 28, despite there being now 171 operational recreational marijuana shops in the Empire State.

Several cannabis company executives said that the list, which is a novel approach to maintaining the financial health of the marijuana supply chain, seems to be a policy success for a market that has struggled to fully launch.

Two companies on the list – Smacked LLC and Royal Leaf NY LLC, which does business as Statis – are both located in New York City, and both were early recipients of Conditional Adult Use Retail Dispensary (CAURD) permits. Smacked opened for business in January 2023 in Manhattan, while Statis opened in July 2023 in the Bronx.

Although the New York Office of Cannabis Management curates the list of delinquent retailers, it’s typically confidential, accessible only to other business licenseholders upstream in the supply chain, such as growers, distributors and other brands. A records request for the list filed in April by Green Market Report seeking a copy of the list was denied by the OCM as of Aug. 28, but an industry source who requested anonymity shared it.

Policy win for New York

While many in the fledgling New York cannabis trade agree that the majority of operators are still getting their legs under them, several sources said that the relatively low number of retailers named on the list is a sign that the underlying policy is working as intended, as a solid incentive for shops to keep their bills paid and up to date.

“I would say about 90% of the time, we’re getting paid promptly,” said Joann Kudrewicz, the owner of Ravens View Genetics, one of the licensed marijuana farms in upstate New York. “The few folks that have been bad payers, I just disengage from.”

Nicolas Guarino, the owner and founder of processing firm Naturae, said he’s kept an eye on the list since it went live in April and estimated there’ve only been about eight licensed retailers of the 171 that have even had their names formally put on the list at one point or another. The only way to get off the list is by settling outstanding bills.

“It’s not very many. You really have to be egregious,” Guarino said. “Everybody isn’t just putting the hammer down at 30 days. In general, it’s only used when the retailer is not responding … They get posted on there, and everyone is like, ‘This is a bad actor.’”

Guarino and Kudrewicz both emphasized that they’ve been as flexible and understanding as possible with a lot of retailers they supply. Guarino said he’d guess around 40 dispensaries are “having some payment problems or are struggling to stay above board in general,” but that as long as they’re communicative with suppliers, that generally they can reach agreements on a payment plan without involving the state COD list.

But, both Guarino and Kudrewicz said, good will only stretches so far, and the existence of the list – which also legally prohibits any retailer on it from using credit to pay for further inventory, forcing them to pay cash on delivery – has been an effective tool to ensure suppliers are getting paid.

Beyond the legal ramifications for retailers, there’s also a reputational hit those on the COD list wind up taking, Guarino said.

“They all have a genuine fear of appearing in that COD list, so it’s like an extra layer of protection,” Guarino said. “Certainly, not everyone is being posted on there.”

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Extenuating circumstances

For the two companies on the list, there are also some potentially extenuating circumstances.

Although no one at Smacked could be reached for comment for this story, farmer Brittany Carbone of Tricolla Farms noted that the shop was the first individually owned CAURD store (the first to open was Housing Works, which is run by a nonprofit) to open, and it was also the first to take on a loan from the Dormitory Authority of the State of New York (DASNY).

Although the DASNY loan program was originally intended to help CAURD licensees with the cost of finding and building out dispensaries, the loans reportedly came with hefty regular monthly payments due back to the state. That may very well be why Smacked has fallen behind on its finances, multiple sources speculated.

“That’s not only CAURD number two, but DASNY store number one. They were subject to those very high buildout costs,” Carbone said. “What does that say?”

Statis Cannabis, meanwhile, wound up on the list for similar reasons, said company President Christian Chavez. He said that Statis is still being run out of a location that was always intended as a small temporary pop-up shop. Its original permanent location fell through after an attempted partnership with DASNY “all fell apart,” after which it’s been thus far impossible to get a replacement approved by regulators.

“We took the risk. We thought we had full DASNY and OCM support, and that was not the case,” Chavez said of the company’s first intended permanent location. “We were supposed to move into the vicinity of Yankee Stadium… A lot of things went downhill, and we did struggle in many, many ways. Right now, it’s surviving until success.”

Statis has a new permanent location lined up, but it’s still waiting for formal approval from the OCM to relocate so it can expand its shelf space and offerings for customers, all to get back on financial track. Chavez said he’s been keeping in touch with vendors to whom Statis owes money to maintain relationships for the long-term. He also said that the company has every intention of paying its debts as soon as it can get its permanent shop up and running.

“It was a lot of false promises. It took us where we are now, but we’re hopeful that we’re turning the corner,” Chavez said, referring to hopes of the DASNY-run social equity fund for cannabis dispensaries. “With the relocation, with the illicit crackdown, and funding behind us, and in the right location, we’ll be able to succeed.”

Evolving situation

Carbone said that Smacked and Statis are outliers, and that in general, she’s seen a noticeable improvement in vendors being paid on time since the OCM activated the COD list.

“It’s definitely tightening up,” Carbone said. “The 60-day plus (accounts receivable) has definitely gone down… Is it 30 days on the dot every time? No, but the fact that there’s not a huge list of retailers on that list means the suppliers know they’re trying to make good.”

“Overall, it’s been a benefit to have that list,” Carbone said.

Kudrewicz emphasized that the situation is still evolving as the industry matures, and that some of her farmer peers have had a very different experience, a tougher time getting retailers to settle their invoices. Many have decided to quit the cannabis trade altogether.

“Some of our cultivator friends are giving up,” Kudrewicz said. “The bigger issue that I’m hearing from cultivators is they just don’t have the resources to keep going, that even though dispensaries opened, it was too late.”

The bottom line for a lot of New York farmers, she said, is that the recreational market didn’t come online as quickly as policymakers had originally envisioned, and that finances got stretched too thin for a lot of cultivators to continue trying to make it work, after roughly two and a half years of zero profit.

For those who are staying in the business, however, Kudrewicz said, the incentive provided by the COD list can be a godsend.

“If you’re still operating on fumes, the 30-day turnaround is a big deal. That at least helps. But there’s just a lot of debt to pay back,” she said.