Jennifer Danyluk moved from small town New Brunswick to Edmonton in 2007, joining nearly 19,000 Maritimers who’d been beckoned by the booming oil economy.
The only home Danyluk, her then husband and their two young children could find to rent was shared with another family who had also moved over from across the country.
Soon, her parents relocated to Edmonton too, and she started progressing in her career, moving to companies in the energy sector.
When her husband, a procurement manager in oil and gas, lost his job, it fell on Danyluk to make the payments and uphold the standard of living they were accustomed to.
She took up a second job in public accounting while her husband waited by the phone for job opportunities that never came.
The company had a market cap of $93.4 million at the time, before it even had a licence to produce cannabis, let alone a provable product.
Founded in 2001, Edmonton-based Radient showed early promise in pharmaceutical cancer treatment, but its successes were cut short by a failed medical trial that was halted after adverse outcomes for patients.
Companies that rushed into the space—some with billion-dollar valuations—went on a hiring spree even before there were clear parameters around manufacturing, retailing, exporting and taxation of cannabis products.
Flush with capital, it wasted no time breaking ground on Aurora Sky and making plans for other greenhouse operations: Aurora Air, Aurora Polaris, Aurora Sun and a Danish expansion, Aurora Nordic.
Aurora would go on an aggressive buying spree, acquiring businesses from every corner of the industry, including greenhouse builders, at-home grow-box manufacturers and even a liquor-store chain it planned to convert into a dispensary franchise.
When Danyluk came on board at Radient in the summer of 2017, there were fewer than a dozen people on salary, she recalls, including Denis Taschuk, who’d been the president and CEO since 2010.
That fall, Aurora made a $14-million investment in the company, financed through convertible debentures, private placements and warrant exercises—a five-year agreement for Radient to process biomass into cannabinoid extract at a premium fee.
Danyluk set about forming the financial and HR team, hiring as many as 40 people in one month.
Danyluk walked into a cannabis store for the very first time with a sense of pride for being part of a leading-edge industry as well as some residual unease from a lifetime of abstinence.
And though Danyluk would leave the industry on her own terms, it was only after finding herself in a much darker place than where she’d started.
Canada was already one of the world’s top producers, not just in output but in quality too; the infrastructure and knowledge capital already existed.
The average illegal grower wasn’t about to take on the start-up and labour costs, let alone fill out a tax return or a licence application that could run 1,000 pages.
Off the bat, legal weed was exclusively accessible to entrepreneurs with deep connections in the financial sector: venture capitalists and stock promoters.
The industry bifurcated into competing markets: The illegal one continued to fly under the radar, paying no taxes and little in the way of overhead; the legal one ballooned beyond a rational size on the back of Bay Street.
Big Pharma funds took the West Coast start-up Tilray from Nanaimo to the NASDAQ, where its initial share price of $17 skyrocketed past $200 within four months, drawing comparisons both to monster successes .
But that couldn’t possibly bear out when comparable, mature markets in the United States were yet to reach that bar themselves.
Looking at precedents for price deflation in older recreational markets like Colorado, his report predicted that oversupply would cut retail and wholesale prices in half by the end of year one.
But it was impossible for this to make it through the capital-markets echo chamber that rewarded companies that made ambitious promises while hoping the fundamentals would eventually catch up.
Aurora was a classic example of selling the dream, which it perhaps did most to employees .
“But as far as him being the CEO of a multi-billion-dollar company, you really got the feeling that was thrust upon him,” says the former employee.
The board of directors’ strategy was to surround Booth with polished businessmen, starting with COO Allan Cleiren, who was brought over from Universal Rail Systems, and executive vice-president Cam Battley, who left a health company he’d founded in the late 1990s.
“The big value proposition was that you could go from the seedling to the finished plant without a human hand ever touching it, because everything was moved by overhead cranes—all of your spinning was done by treadmill belts,” says the source.
It’s one thing to have 200 plants in a basement grow-op; managing 50,000 or 100,000 plants simultaneously with state-of-the-art technology is an entirely different skill set.
The result for retailers and consumers is lower-quality and lower-potency products than what you’d see on the illegal market sold at a higher price to make up for the cost of tamper-proof packaging and government taxes.
Chris Bolivar, a former Edmonton adman who now leads branding for the chain dispensary Fire & Flower, admits it has been difficult competing with the illicit market—especially at the start, when Aurora and Canopy Growth controlled the lion’s share of shelf space.
In an industry that’s prohibited from using creative advertising, having higher THC percentages than competitors helped Aurora gain nearly a fifth of the market share in the first quarter of 2020, the most of any LP.
But after legalization, the forecast combined output by Canada’s top nine cannabis producers amounted to more than triple Health Canada’s projected market demand of 926,000 kilograms per year.
In the earliest days, so much about the industry was uncertain: What would future regulations look like? Aurora tried to stay ahead of the game by investing in prospects out of the competition’s hands.
Cannabis oils, extracts and edibles were relatively novel products, but altogether, they’d already gained a third to half of the market share in jurisdictions in the U.S.
Radient was poised to produce the cheapest and largest quantities of THC and CBD distillates in the country.
As a result of time sunk into construction and without products to sell, Radient had two quarters without revenue, from September 2018 through to February 2019.
In the meantime, Aurora began doing its own in-house extractions using two CO2 extraction rigs at various plants, which the product-development team preferred over the discoloured and pungent samples from Radient.
They think it’s more likely that Radient’s scientist-led team, who had no prior cannabis experience, could not figure out how to produce a high-potency extract with their own technology.
A Radient staffer tells me they would call Aurora, saying , “It’s ready for you to come pick up,” and then there’d be no response.
And while the abysmal sales revealed in its first post-legalization earnings call were largely forgiven by investors, the second earnings report in spring 2019 sent them running, taking Canadian pot stocks down with them.
“The company wasn’t performing and generating cash flows and revenues, like it announced or promised,” says Danyluk.
This was not something Radient had carried in stock before, nor would Radient need to fulfill its master service agreement with Aurora to process shipments of biomass for a contractor’s fee.
Stranger still, according to the former investors who are plaintiffs in the lawsuit, Radient—a company that was never in the business of selling cannabis—sold approximately US$18.1 million of biomass back to Aurora over the next nine months.
According to an investigation by industry research group TheCannalysts, the transaction was likely a last-ditch effort orchestrated by the bigger company, Aurora, to fluff up its financials with bulk sales to a company it had significant influence over.
“Aurora was getting a smoking deal.” The companies began to do business outside of the agreement, which saw Radient purchase bulk cannabis from Aurora, process it and then sell it as finished product to Aurora and other clients it hoped to gain for survivability.
The class-action lawsuit against Aurora alleges that the company used a fraudulent scheme to inflate its fourth-quarter results in 2019, including the sale of the US$21.7 million of dried cannabis to Radient.
What’s more, the steadily decreasing price of biomass suggested that, at best, Radient had recklessly overpaid for the inventory when it couldn’t even pay its overhead bills, such as forklift-rental charges.
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The motion contends, among other things, that the claims related to Radient are purely speculative, the plaintiffs fail to allege facts that support any evidence of a round-trip transaction and there is nothing unusual about a sell-and-hold transaction—in this case, where the product sold to Radient .
In fact, it was worse: She watched Radient’s share price plummet from a high of about $2 a share down to a penny stock.
While it stung to lose her stock-market earnings, she barely had time to think about it with all the other stresses she faced when the pandemic hit.
Danyluk was hospitalized for 10 days in October 2020 due to a bacterial infection that her exhausted immune system couldn’t fend off.
Just as Grizzle had prophesied in its bleak 2018 report, product oversupply led to price drops of more than 50 per cent.
But they can afford price compression, unlike the 836 licensed producers across the country today, who put about 30 per cent of their top lines toward federal and provincial taxes.
Of particular concern is the excise tax, which takes $1 per gram of the wholesale price of flower, regardless of the cost of production or the product’s retail price.
That may still be viable for companies like Aurora, but not for smaller growers like Tantalus, which rarely produces cannabis for less than $1.50 per gram.
“I believe that there’s a substantial majority of small to medium enterprise cannabis businesses that have either taken excise tax vacations to be able to create survivability for at least the short term or have just stopped paying their excise tax entirely,” he says.
As of this writing, 34 licensed businesses—cultivators, processors, retailers and lab testers—are listed on the website for Toronto’s Hyde Advisory & Investments, which began as a security and compliance consultancy but has evolved to include a cannabis-business brokerage.
Many cannabis professionals, even those embittered by widespread financial malfeasance, blame the government for the industry’s inability to rebound.
To put it simply, the main problem hanging over the industry is that the biggest and most influential LPs were overly aggressive in predicting market size and their share.
He adds that the industry is only now finally stabilizing and “trudging toward an equilibrium” far lower than promised in 2018 by industry leaders, most of whom have left their founding companies.
There’s been a trend of former Canadian LP executives looking for the future of cannabis in the faster-growing and more profitable industry in the United States.
Meanwhile, there’s a rosier, albeit humbler, future for companies that specialize in a smaller stable of cannabis products and have fewer steps in the distribution process.
Though it’s not yet profitable, Radient seems to be turning a corner since freeing itself of Aurora and shedding its long-time president and CEO, Denis Taschuk, and its flawed technology.
She also makes time for her health, her three pot plants and her hobbies, including a recent experimentation with sous-vide cannabis extraction.