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High hopes, low profits likely for Vegas cannabis consumption lounges

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Temperatures may be soaring this summer in Sin City, but cannabis consumption lounges have a more temperate forecast ahead of them.

More than a year after Nevada regulators approved the first consumption lounge licenses, only two state-licensed lounges have opened in the city. Smoke and Mirrors, which is run by Thrive Cannabis Marketplace, began welcoming patrons in February, while Planet 13’s Dazed! opened its doors in April.

The path to opening these lounges has been long, starting back in June 2021 when the state legislature passed a bill to allow the establishments. It took more than a year – until September 2022 – for the Las Vegas City Council to opt in to the law. It didn’t actually pass the ordinance to implement the lounge rules until March 2023.

On top of that, recent setbacks slowed progress to getting the industry segment off the ground. The Nevada Cannabis Compliance Board last week disqualified six of 10 social equity applicants selected in a 2022 lottery, citing residency requirement issues. The board plans a second drawing to fill the now-open slots, according to the Nevada Independent.

Additionally, there are 38 more lounges are in various stages of consideration, according to the CCB.

“It’s not a money maker”

Many folks in the industry have lauded the move toward allowing public consumption spaces, especially in tourist hot spots like Las Vegas. However, those directly involved have a different perspective.

Larry Scheffler, co-CEO of Planet 13 Holdings Inc. (CSE: PLTH) (OTCQX: PLNH), told Green Market Report that he views consumption lounges more as customer attractions than revenue generators. For one, Planet 13 lounge features some very Vegas-y design elements, including a secret entrance through an old English phone booth.

“It’s an overload almost on your senses,” Scheffler said during a January phone call.

At the same time, “It’s not a money maker in my eyes,” Scheffler noted at the time. He cited regulations that prevent customers from bringing in outside products and the typically low consumption volume versus alcohol in bars.

For example, the company has used the lounge as a bridge into professional sports, organizing meet-and-greet events with athletes and bring visibility to their offshoot brands, such as its P13 fight gear.

Planet 13 recently secured rights to show UFC pay-per-view events at its lounge and is pursuing deeper ties with the fighting organization. The eventual unicorn is hosting big-ticket bouts at their complex.

“We want to be there. Like, we want Planet 13 to be a sponsor of the UFC,” Derek Gumin, the company’s national wholesale director, said.

Adding a 60,000-square-foot nightclub to its Vegas complex has also been on the wish list for a while now, which would bring its total facility space to about 150,000 square feet.

“So, I think at a point, there’s nothing we won’t do,” Gumin said.

Scheffler said it would be the “last build out, but that wouldn’t be done until 2025.”

There’s also a tattoo lounge in the vicinity, with plans for podcast studios and a 14,000-square-foot, two-story interactive cannabis museum as “one more draw to bring them into the superstore,” Scheffler said.

The existing superstore already includes more than 70 cash registers, a Mexican-American restaurant, a full bar, a clothing store, and a production facility “where people can watch, a Willy Wonka-like chocolate factory, all the gummies and chocolates and drinks being made,” he said.

The company is also cooking up plans for a superstore in Miami pending recreational legalization in Florida.

Despite the challenges with the model and cannabis, optimism still reigns around consumption lounges. Christopher LaPorte of cannabis consulting firm RESET told the Independent in April that 70% of Smoke and Mirrors’ business comes from cannabis-infused drinks, which are ideal products for the model.

And as in the rest of the industry, the consumption lounge segment will likely see significant changes in how it operates as the overall market continues to evolve.



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Cannabis companies, big and small, collapsed in 2024

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As 2024 winds to a close, the year may well be remembered as one in which the U.S. marijuana industry got a serious wakeup call, with several big-name companies flaming out in spectacular fashion, while plenty of smaller operators also quietly closed up shop.

Even as more state marijuana markets continued their new rollouts – from New York to Ohio to Missouri – the sun set for the last time on several big marijuana names, including MedMen Enterprises, High Times, StateHouse Holdings and Slang Worldwide, all of which just a few years ago seemed poised to become national cannabis brands with impressive portfolios.

Instead, this year the bill came due for a lot of the industry. A few big-name cannabis failures kicked off the reckoning in 2023, such as the major distributor Herbl in California, which had such a web of connections and so much outstanding debt that its ripple effects went on for months. And when those bills arrived, a number of cannabis companies found they were unable to pay.

However, the big players were far from the only casualties this past year; there were also plenty of smaller businesses that went bankrupt or into court-appointed receiverships for various reasons, including Unrivaled Brands, Irwin Naturals, Delta 9 Cannabis and Revolutionary Clinics.

But it wasn’t all bad news for the industry. It’s also worth highlighting the high-profile turnaround of California-based cannabis delivery operator Eaze, which took a wealthy patron to save the business from its troubles.

Eaze even told shareholders in the fall that it was prepping to lay off all employees and close down by the end of the year, before its new owner, billionaire James Henry Clark, resuscitated the company with $10 million of his own money in November after buying the business at auction in August.

Here’s a rundown of some of the high-profile cannabis collapses of 2024 and how they went bust.

MedMen Enterprises

MedMen was by far the highest-profile washout of the year. Originally a darling of the California medical marijuana boom prior to going public in 2018 (CSE: MMEN), the former unicorn formally filed for bankruptcy in Canada and a court-appointed receiver in the U.S. in April, after the company ran up nearly $600 million in debts during a multiyear expansion push that ultimately proved fatal.

Warning signs existed for years before MedMen’s collapse. Founding CEO Adam Bierman suddenly relinquished control of the struggling business in 2020, amid mass layoffs at the multistate operator and ongoing sale of assets in a desperate attempt to right the financial ship. Co-founder Andrew Modlin also resigned at the time.

Even so, four years of a revolving C-suite and new corporate strategies came to naught, and MedMen’s former national empire – which spanned seven states and more than two dozen retail dispensaries – has been resigned to the auction block.

High Times

High Times’ foray into the actual marijuana plant-touching business came to a ruinous conclusion this year when its assets went up for auction after it couldn’t repay a $29 million loan.

The original stoner magazine, which dates back to 1974, pivoted from cannabis media directly into selling marijuana in 2020 with the purchase of 10 California dispensaries from Harvest Health and Recreation for $80 million in a combination cash-and-stock deal.

The parent company, Hightimes Holding Corp., never truly found its footing in the tough California market and endured critical press for years as it struggled. Hightimes Holding Corp. tried to go public in 2023 via a complex intellectual property deal with Lucy Scientific (Nasdaq: LSDI), but that fell apart after a lawsuit from U.S. securities regulators alleged fraud and illegal stock promotion by CEO Adam Levin, which resulted in a settlement of more than $500,000.

High Times was ultimately forced to begin selling off dispensaries and assets this year to settle a $29 million debt to ExWorks, under the management of a court-appointed receiver.

StateHouse Holdings

Originally known as Harborside – a major part of cannabis activism in Northern California during the height of dispensary raids in the Bush and Obama years – StateHouse earlier this year was relegated to bankruptcy in Canada and a court-appointed receiver in the U.S., driven by a lawsuit over $116 million in debt owed to one of its creditors.

Harborside was rebranded as StateHouse in 2022, three years after it was taken public in 2019 by brothers Steve and Andrew DeAngelo, who said later they were forced out by what they described as a hostile takeover. After the DeAngelos were removed, new company leadership went on an acquisition spree, purchasing three companies in the span of a year and rebranding in a bid to become a more powerful overall California brand.

But the move backfired, and it proved too much too quick. StateHouse found itself unable to repay loans from creditor Pelorus Fund, and Pelorus filed suit in September to force StateHouse’s hand.

StateHouse has since been put up for sale, and the receiver in charge is taking bids for assets until Jan. 15, 2025.

Slang Worldwide

At its height, Toronto-based Slang Worldwide distributed cannabis goods to 2,600 dispensaries in 15 states. But in November, the company declared bankruptcy in Canada and entered a receivership in the U.S., after seven years in the marijuana trade, and reported pared-down operations in only Colorado and Vermont.

Slang drew far less media attention than MedMen and High Times, and its quiet path to insolvency arguably more reflects the broader troubles of the U.S. and Canadian cannabis industries in general. After ambitious expansion for several years, Slang was forced to pull out of several key markets, including California, Oklahoma and Oregon, in 2023 as conditions worsened for it and other operators.

More trouble appeared on the horizon as recently as fall 2023, when Slang essentially put itself up for sale when it retained PGP Capital Advisors to evaluate its options.

The bottom line was the company didn’t have $17 million with which to repay creditors when at least one loan comes due in 2025. Slang formally entered bankruptcy in Canada on Nov. 26, according to receiver B. Riley Farber’s website, and a meeting of creditors was scheduled for Monday this week.

In a trustee report, Farber wrote that Slang had just $107,325 in total assets, including $52,529 in cash, against $27.2 million in debts to various creditors.



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Appeals court ruling deals blow to Cannabis Commission – Cannabis Business Executive

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