Cannabis buds
Cannabis buds. Credit: Christine Stuart / CTNewsJunkie

One of Connecticut’s four medical cannabis suppliers is embroiled in a financial meltdown that could disrupt the state’s recreational supply.

The Greenrose Holding Company, a multi-state cannabis operator that acquired Theraplant at the end of 2021, is facing a financial crisis based on recent U.S. Securities Exchange Commission (SEC) filings, including disclosures that the company is unable to meet debt interest obligations while also being embroiled in a collections lawsuit in Arizona.

Meanwhile, Theraplant is one of four medical cannabis producers in the state that have been approved to supply the nascent adult-use market with flower. If Theraplant were unable to continue supplying the market, the state could clamp down on transaction limits, according to a Department of Consumer Protection spokesperson.

“Maintaining an adequate supply for a viable market, particularly the state’s medical patients, is the Department’s priority,” said DCP spokesperson Kaitlyn Krasselt in an emailed statement. “Accordingly, RERACA [Responsible and Equitable Regulation of Adult-Use Cannabis Act] provides the Department with discretion to set transaction limits to ensure adequate supply as the market dictates. The Department will continue to monitor supply and exercise its discretion appropriately based on market needs as they arise.”

Currently, the state is observing a transaction limit on adult use cannabis at 7 grams of raw flower, or about a quarter of an ounce, as well as the equivalent amount of edibles or cannabis concentrate based on its potency.

Adult use cannabis sales in Connecticut officially began on Jan. 10, 2023. The start date came 30 days after the Department of Consumer Protection announced that first group of medical cannabis producers had been approved to also grow for the adult use market.

The state’s adult use cannabis law mandates that at least 250,000 square feet of plant canopy has to be approved before the recreational market can officially open for business. The four existing medical producers, which includes Theraplant, received their final approvals in early December, allowing the state to officially announce three days later on Dec. 10, that the 30-day clock before legal sales had begun.

“The law requires at least 250,000 square feet of growing and manufacturing space in the aggregate be approved for adult-use production before retail sales can begin at licensed retailers, including hybrid retailers. With all four producers successfully converted, the 250,000 square-foot threshold has been met,” said the Dec. 10 press release from the DCP.

The RERACA sets a maximum of 1 oz. of flower per transaction, but it also allows the state to reduce that rate in order to protect a minimum supply for medical cannabis patients.

“To avoid cannabis supply shortages or address a public health and safety concern, the commissioner may set temporary lower per-transaction limits,” says the law.

Aside from hybrid medical and adult use cultivation licenses, Greenrose applied for four adult use retail licenses in Connecticut in partnership with social equity applicants as Economic Joint Venture (EJV), but all four were denied by the state’s Social Equity Council. The company also applied for two hybrid retail licenses as EJVs.

Greenrose’s financial troubles have long been on the horizon. Back in August, Greenrose disclosed in its Q2 report to the SEC that the company lost $24 million in the first half of 2022. At that time, the report noted that the company planned to focus on “ramping cultivation capacity” in both Connecticut and Arizona.

Greenrose Holdings announced in September 2022 that its board of directors had removed CEO William F. Harley III, and replaced him with interim-CEO Tim Bossidy, according to a Sept. 22, 2022 SEC filing. Bossidy is expected to remain at the helm of the company until a new owner can be found.

A majority of stockholders, representing ownership of 59%, attempted to replace the board of directors on Jan. 24 without scheduling an official meeting, issuing a prior notice or holding an official vote. The move came two days before an Arizona judge rejected the majority shareholders’ court bid to appoint an interim receiver for the company.

Greenrose and its debt holders are still awaiting trial in Maricopa County, Arizona for a debt collection lawsuit. Judge Scott McCoy denied a request for an interim receivership from Greenrose’s debt holders during a Jan. 26, 2023 emergency pre-trial hearing.

Even if Greenrose is able to obtain a new owner for Theraplant, that process would still have to be approved by the state.

“All transfers of ownership require approval by the Department [of Consumer Protection],” wrote Krasselt. “Any individuals meeting the definition of a backer would need to apply and register as a backer. Additionally, the law requires an antitrust review by the Office of the Attorney General.”

Greenrose Holding Company did not respond to requests for comment.