United Cannabis Chapter 11 Bankruptcy: Plant-Touching Litmus Test

United Cannabis Corporation (“United Cannabis”) and its wholly-owned subsidiary, UC Colorado Corporation, filed for Chapter 11 bankruptcy protection in the Bankruptcy Court for the District of Colorado on April 20, 2020. United Cannabis’ primary line of business is operating extraction facilities to convert compounds of industrial hemp flower into finished CBD products, while also deriving a limited amount of revenue from licensing its IP to plant touching businesses. The United Cannabis bankruptcy proceeding could be a unique test case for the cannabis industry.  Here is what you need to know:

Cannabis:  How Much is Too Much? What makes this case so fascinating is that, following the passage of the 2018 Farm Bill, certain hemp/CBD companies are now able to file for federal bankruptcy protection, which relief was denied to plant-touching and, for the most part, ancillary businesses.   United Cannabis’ business generates nearly all of its revenue from CBD product sales, with only (at most) a de minimis amount of revenue derived from IP licensing fees to medical and recreational marijuana businesses. According to the company’s recent SEC filings, the United Cannabis reported substantially all of its revenues – nearly $13 million – were derived from the sale … Keep reading

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