The Alabama Medical Cannabis Commission has experienced delays and questions about its methods and operation since it was established by state law in 2021.
From the adoption of rules to insufficiencies in its application portal and “potential inconsistencies” in the approval process, the commission has not fully explained what is behind its many perceived missteps.
And the public has received little information about the companies granted licenses by the commission, other than the companies’ names, leaving Alabama citizens with scant information about who will control cannabis operations in the state.
Chicago-based Verano Holdings was given the commission’s No. 1 rating under its scoring scheme. The company was granted an integrated license to operate a medical cannabis cultivation and processing facility in the state and five medical marijuana dispensaries.
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A report by the cannabis industry financial news service The Green Market Report found that ten multi-state cannabis companies owed over half a billion dollars in federal taxes. One of those companies that owed the IRS over $150 million was Verano, recently given the most lucrative license Alabama awards.
According to The Green Market Report, Verano Holdings in 2022 owed $161.4 million to the IRS in unpaid taxes, and if the company were forced to pay back its taxes, it would likely face serious financial trouble.
“The Verano Holdings would be financially underwater in a big way, with $161.4 million owed to the IRS compared with its $92.8 million cash on hand – meaning it owes 78 percent more in taxes than it had in cash at the end of its second quarter,” according to the report.
Green Market, citing multiple sources, wrote: “Much, or perhaps all, of the tax debts have been deliberately not paid by companies so that the businesses can use the cash to fund operations or other plans.”
According to the report, Verano CEO George Archos indicated that the company’s tax debt was not being ignored but was part of the company’s “capital allocation strategy.”
“Part of our capital allocation strategy is to lengthen our tax payment cadence,” Archos explained to shareholders in an earnings call in 2022, according to Green Market. “The strategy is not unique to Verano and has been utilized amongst other large U.S. companies. The cost of penalties and interest for this are significantly below the available cost of debt.”
Green Market also reported Archos saying: “We continue to efficiently manage our income tax payable line and continue to manage as a cheap source of capital and generally keep about a trailing 12- to 18-month balance outstanding.”
According to the company, “Verano’s active operations span 13 U.S. states, comprised of 14 production facilities with over 1,000,000 square feet of cultivation capacity.”
Verano Holdings Corp. (VRNO) is publicly traded on the Canadian Stock Exchange.
APR reached out to Verano Holdings for comment on the report but did not receive a statement as of the publication deadline.
None of this is to indicate the selection of Verano Holdings was inappropriate, however, it may emphasize the lack of transparency in the Commission’s process. The likely outcome of the Commission’s multiple missteps will be lawsuits filed by companies who feel they were treated unfairly during the process, which included the Commission’s portal’s failure to allow more than 10-megabyte files to be uploaded during the application process. Upon realizing the portal’s limited upload ability, staff at the Commission allegedly provided some companies with exceptions while denying others.
These questions will likely be only answered in front of a judge. For now, the entire process is revealed to be flawed and messy, with the public and corporations wondering who was responsible and how will the situation finally be resolved.
H/T: www.alreporter.com
