Tuesday, March 27, 2018

Pot shop plans August opening in Williamstown, projects $350/ounce pricing

From left, Josh Ferranto, Joshua Silver and Brendan McKee

Posted by Bill Densmore

WILLIAMSTOWN, Mass. -- Operators of a marijuana "store" opening in the Colonial Shopping Center in August took questions at a public meeting attended by about 22 people on Saturday morning (Sept. 24) at the Williams Inn. The initial opening will serve recreational customers, with medically certified users coming later. Projected cost of marijuana: $350 an ounce. 

Josh Ferranto, Joshua Silver and Brendan McKee are among directors of Silver Therapeutics Inc., the applicant to open the store; one of three they hope to establish under Massachusett's new "legal pot" statute and regulations.  Silver, a real-estate attorney from Saratoga Springs, N.Y., and the company's CEO, and McKeen, who lives in Quincy, Mass., did most of the talking.  McKeen is chief financial officer. Ferranto is operations director.

Silver, who is the company's CEO, filed on Feb. 23  a siting application with the state  which projects the company will have $610,000 in revenue in 2019 and will lose $172,000 in that first year. In year two it projects positive cash flow of $124,000 on $682,000 in revenues; in 2021 revenues of $727,000 and positive cash flow of $414,000 are projected.  patients/customers will grow from 175 a year to 323 a year, representing 4,200 visits in 2019 and 7,752 visits in 2021; the average visit will involve purchase of a quarter-ounce of marijuana at an estimated cost of $350 per ounce in 2019, dropping to $300 an ounce by 2021. 

Some points raised during the hour-long meeting: 
  • The firm is working on a website, at http://agtherapeutics.com, which McKeen said should be live in 7-10 days with information about the company and its principals. Silver Therapeutics chief operating officer, Donald "Donnie" Douglas, is based in Washington state, and owns American Mary, a marijuana shop in Seattle, Silver said.  Application materials say John West, also in Seattle, will be lead grower.
  • From the audience, retired Williamstown pediatrian Michael Sussman expressed concern "that people using marijuana are using it in a responsible way" and that the shop would not inadverently result in minors getting access to marijuana. He said he hopes town officials hold the shop to a "higher standard" than it holds liquor stores.
  • Silver said by law the store will have redundant security systems and patrons -- both medical users and adult recreational users -- will have to show their driver's license and registration card twice -- once to enter the shop and once at checkout.  Answering questions, Silver said the shop will seek to weed out any underage buyers but there is little they can do once a qualified buyer of legal age leaves the premises other than notify police of any suspicious activity.
  • From the audience, Williamstown resident Mark Draper observed that safe, adult use of marijuana was a community challenge, not exclusively the responsibility of the planned dispensary. "Education comes from within a household," he said. "A corporation can only do so much."
  • "There are things we want to do to engage tihe community," said McKee, who will be the store's manager.  "We're going to be spending a lot of time here." McKeen said he was a graduate of Amherst College who now lives in Quincy and expects to get an apartment in Williamstown.
  • The Town of Williamstown will receive three percent of all sales through a pass through of state taxes totaling 20 percent for recreational sales, said Jasoh Hoch, Williamstown town manager, who attended the briefing.  The shop has also agreed to make a once-a-year flat-amount donation of $5,000 to drug-awareness efforts. (For iimportant details of revenues to the town, see Hoch's email at the bottom of this post). 
  • Because federally chartered banks are forbidden to have marijuana businesses as depositors, Silver said the shop will mostly deal in cash; but little will be kept on site; it will be moved to a cultivation facility to be built in Orange, Mass., the location of its second shop. A third shop location is not yet announced, he said.  Century Bank, a state-chartered bank, may be able to handle their banking needs.
  • Silver Therapeutics Inc. was originally set up as a non-profit corporation based upon requirements of state regulations.  But Silver says the state realized that was making it hard for proponents to raise investment and so the state is now permitting for-profit structures and Silver Therapeutics is converting. Silver told one meeting attendee after the formal presentation that the company seeks $4 million in investment. 
Other people involved in Silver Therapeutics, according to its Aug. 2017 application filed with the state  are John West and Michel S. Evanusa.  The application lists Evanusa, a New York time-share and condominium attorney, as a director of Silver Therapeutics, committing $500,000 in initial capital to the company. An earlier April, 2017, filing bears Evanusa's signature stating her commitment to make $2.0 million available to the company.  Sliver said he didn't want to"say too much about our investors" and said "investors are still coming in."  In a subsequent email exchange, Silver said Evanusa is his aunt and her commitment is a line of credit. 


An email received from Williamstown Town Manager Jason Hoch explains three sources of public revenue the town expects would result from opening of the Silver Therapeutics shop:   (1) An annual payment to the town of 3% of gross revenues. (2) Another 3%  local-option tax on non-medical retail marijuana sales in town which Hoch will propose for adoption at Town Meeting in May and (3) A pre-negotiated annual lump-sum payment of $5,000 to support public drug abuse prevention, treatment or education programs.

Here is the email:

---------- Forwarded message ----------
From: Jason Hoch 
Date: Mon, Mar 26, 2018 at 12:06 PM
Subject: Re: QUESTION: CAn you explain the tax benefits again of having the marijuana shop?
To: Bill Densmore

Bill -

There are multiple streams of funding to the town. First, for both the medical and retail operations, the Town has entered into Host Community Agreements. These each call for 3% of gross revenue to be paid to the Town annually. Under the guidelines from the state, these are restricted use. From the agreement:

"Company shall make the Annual Payments set forth in Paragraph 2, above, to the Town of Williamstown. The Treasurer of the Town shall hold the Annual Payments in a separate account, to be expended by the Town without further appropriation pursuant to G.L. c.44, §53A, or otherwise in trust, for the purposes of addressing the potential health, safety, and other effects or impacts of the Facility on the Town and on municipal programs, services, personnel, and facilities.  While the purpose of the Annual Payments is to assist the Town in addressing any public health, safety, and other effects or impacts the Facility may have on the Town and on municipal programs, services, personnel, and facilities, the Town may expend the Annual Payments at its sole and absolute discretion. Notwithstanding the Annual Payments, nothing shall prevent the Company from making additional donations from time to time to causes that will support the Town, including but not limited to local drug abuse prevention/treatment/education programs."

The Town is required to report annually how those funds have been expended. And worth noting that 3% of sales is the maximum currently allowed under the state regulations

Next, there is a separate local option tax, that can be voted on at Town Meeting for up to an additional 3% of tax on retail marijuana sales (not medical). We intend to bring that article to Town Meeting this May. Those funds are unrestricted revenues for the general fund. At this point, we have not considered further restrictions on those, since will already have the restricted funds in a great amount from the two HCAs.

Lastly, the retail HCA includes a separate requirement for an annual additional contribution for public education. (It appears that your bullet may be read as a one time only payment.) From the agreement:

"The Company, in addition to any other payments specified herein, shall annually contribute to non-profit entity or entities in an amount no less than five thousand dollars ($5,000) for the purposes of  drug abuse prevention/treatment/education programs (the “Annual Donations.”) The education programs shall be held in Williamstown and those communities adjacent to Williamstown. Prior to the selection of a non-profit entity program for this purpose, the Company will review their intentions with the Town, acting through its Town Manager and Chief of Police to ensure that the proposed programming is consistent with community needs.  The Annual Donations shall not be considered part of the Annual Payment to the Town."

Hope this helps. Thanks for checking.



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