The government in Ontario has enforced the penalties which were written into the conditions for the businesses that were selected to open the first offline cannabis retail stores. The businesses were mandated to open for business by April 1 this year.
Hundreds of companies applied for brick-and-mortar recreational cannabis retail store licenses. However, the province decided to use a lottery to select just 25 businesses because of the persistent supply shortages in the country. The regulators felt that it would be pointless to license many businesses yet those businesses could not be certain that they would have access to inventory to remain operational.
While the method to select which businesses would receive the first set of licenses was rather unorthodox, there was nothing lax about the stringent conditions which were given to the successful applicants.
One of those conditions required each applicant to provide a $50,000 letter of credit to be entered in the draw. Money would be drawn against the letter of credit as a penalty based on how late that business was in opening its doors to the public.
The first installment of penalties was imposed on the businesses which didn’t open by April 1 and more money was drawn against the letters of credit of the entities which hadn’t opened by April 15.
It should be noted that less than half of the 25 licensees opened by the deadline set by the provincial government.
The recent announcement by the Ontario Alcohol and Gaming Commission that a final draw down was made against the letters of credit of seven businesses which failed to open by April 30 means that the affected businesses have lost the entire $50,000 indicated in the letter of credit.
It isn’t yet clear whether the provincial government is entirely blameless in these delays to open. For example, was the time given to the businesses to meet all the licensing requirements, such as obtaining approval from the local authorities where the businesses wish to operate sufficient, or the province was unrealistic in the deadlines set?
The reality dawning upon those who wish to run cannabis businesses in Ontario is that no one will be spared if they aren’t serious about making use of the license given to them. Ontario means business on matters of recreational cannabis!
Hemptown USA and Green Hygienics Holdings Inc. (OTCQB: GRYN) sympathize with the entrepreneurs who have lost their entire $50,000 letters of credit and hope that there is a mechanism for them to plead their case before the regulators if there were genuine unavoidable reasons for the delay in opening shop.
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