KushCo Holdings Inc (OTCQX:KSHB) hailed 2020 as a “banner year” for the legal cannabis industry as the election resulted in New Jersey, Arizona, Montana, and South Dakota voters approving legal adult cannabis sales.
The four states now join 11 states that have already decriminalized cannabis since Colorado and Washington broke the seal in 2012. In addition, voters in Mississippi approved medical cannabis use.
Overall, all the states with legalization ballot initiatives in 2020 approved their respective measures, representing a 100% win rate at the state level for the legal cannabis industry.
“As we forecasted in the months leading up to the election, 2020 has been a banner year for the legal cannabis industry,” said KushCo co-founder and CEO Nick Kovacevich.
“Not only has the industry shown remarkable resiliency and strength following the onset of the COVID-19 pandemic, but with the recent legalization victories, it is reaching new horizons, opening up markets that, in the aggregate, are estimated to generate in excess of $2.5 billion in annual sales in the next five years,” he added.
The largest state by population to approve cannabis sales was New Jersey, where the measure enjoyed a margin of better than 2-to-1, and it could push some of its neighbors to do the same. Both Pennsylvania and New York have been discussing legalization for some time.
Kovacevich said his company was “thrilled” to see the outcome in states like New Jersey and Arizona where the cannabis packaging company's customer base of multistate operators (MSOs) have made “significant inroads” in recent months.
“We believe these wins support our strategy to focus on the leading MSOs who are continuing to expand their geographic footprint and customer reach and should help drive continued growth for KushCo,” added Kovacevich.
“Our business does not require incremental capital expenditures and is already equipped to service these customers once the regulators approve the commercialization of these markets.”
The national election could also have an effect on cannabis-legalization efforts at the federal level. President-elect Joe Biden and his Democratic running mate, Senator Kamala Harris, have voiced support for decriminalizing marijuana on a federal level.
The US Senate has been the biggest barrier to federal marijuana reform, so a change there would be welcome to the marijuana industry.
KushCo also talked about 280E, a provision in the federal tax code that prevents marijuana companies from deducting ordinary business expenses.
In a nutshell, the 280E tax code lays down that businesses that traffic in controlled substances cannot deduct any expenses incurred in carrying on the production, distribution and sale of controlled substances.
“We remain hopeful that the future Biden administration can help alleviate the onerous 280E tax implications that have acutely impacted our customers, particularly the large MSOs,” said Kovacevich.
“Although KushCo is not subject to 280E, given the fact that we are a ‘non-plant touching’ business, this stringent taxation has impacted our customers’ ability to grow profitability; and if these tax implications are removed, we would expect more significant growth from our customer base.”
The KushCo boss urged the Biden administration and Congress to work together on the legalization of cannabis pointing out that it could bring "significant benefits” in terms of “more jobs, tax revenue, social equality, and safer communities.”
Cannabis packaging company KushCo has sold more than 1 billion units to growers, brand owners, processors and producers across North America, South America, and Europe. It specializes in child-resistant and fully customizable packaging, exclusive vape hardware and technology, and complementary solvents and natural products.
Contact the author Uttara Choudhury at [email protected]
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