Marijuana Cultivator Rising In Newport Adds Illinois Ally

Marijuana Cultivator Rising In Newport Adds Illinois Ally
Delta Medical Cannabis Co. is building a 35,000-SF medical marijuana cultivation center in Newport. Its exclusive consultant is Revolution Enterprises of Delavan, Illinois, which has grow operations, dispensaries or both in three states.

Don Parker can tell you chapter and verse about how he’ll grow medicinal marijuana at a $9 million, 35,000-SF cultivation facility his company is building in Newport. Details on how his employees will travel to Illinois to be trained at a world-class cannabis growing site roll off his tongue.

But ask where he’ll get his first plant or seed, and he goes quiet for a beat.

“There’s a reason the rules are silent on that particular point,” said Parker, a Jonesboro lawyer and president of Delta Medical Cannabis Co. “Federal and state regulations conflict.”

It’s a don’t-ask-don’t tell paradox, intentional secrecy in an otherwise heavily regulated system.

“As a good Catholic, that’s what we call Immaculate Conception,” added Mark De Souza, CEO of Revolution Enterprises of Illinois, Parker’s model in the cannabis business. Revolution has signed an exclusive consulting and IP deal with Delta, one of two cultivators setting up in Newport. The Newport facilities — the other is Natural State Wellness Enterprises — will be the last of five licensed state cultivators to open.

The consulting deal is the latest example of Arkansas cannabis companies aligning with national forces as the industry takes off. Those relationships have fueled protests from would-be competitors who were denied cannabis licenses. Along with the five cultivation sites, 32 dispensaries have licenses.

Arkansas rewarded industry experience in judging applications, but also required all companies to be at least 60% owned by Arkansans. The state has generally backed licensees in challenge cases, and has granted nearly all requests for changes in ownership, location and design of cannabis facilities.

Delta Medical, having itself endured a regulatory challenge involving taxes, is ready to feed the emerging market with products market-tested in Illinois. Six Arkansas dispensaries are now selling cannabis, and the other 26 are hustling to open, creating opportunities for Delta as it starts harvesting early next year.

“We definitely want to get it right and be able to offer the best array of products for patients in Arkansas,” said Parker, a partner at Parker Hurst & Burnett PLC in Jonesboro. “That’s what attracted us to Revolution, their accomplishments in Illinois and in other states, and the fact that they have a full array of products.”

The consulting deal includes intellectual property rights and years of vertically integrated know-how at Revolution, which has grow sites, dispensaries or both in Illinois, Florida and Maryland. It sells more than 150 products, and it hopes to teach Delta workers how to grow cannabis in Arkansas and turn it into these products.

“Revolution has experience in using the extraction process for products like lotions, tinctures, oils and edibles; they’ve spent years developing this through research and development,” Parker said. “We’re fortunate.”

Ties to National Firms Abound

Many of the state’s licensees are allied with national players in the legal marijuana business, now a $10-billion-a-year industry in the U.S.

Examples include deals involving both dispensaries planned for Little Rock: Grassroots Opco, based in the former Joubert’s Tavern building at Kanis and Rodney Parham roads, is affiliated with Grassroots Cannabis of Chicago, which announced this month that it is being acquired by Curaleaf Holdings of Massachusetts for $875 million. Natural State Wellness, the other Little Rock dispensary, will be opening a quarter-mile up Rodney Parham in a property recently purchased by BRLS Properties AR-Little Rock LLC, an affiliate of Harvest Health & Recreation Inc., a cannabis leader based in Tempe, Arizona.

BRLS paid $200,000 for the 900 S. Rodney Parham property and $26,000 more for an adjoining 0.14-acre parcel.

Steep Hill Arkansas in Little Rock, the state’s only authorized cannabis testing facility, is affiliated with Steep Hill Labs Inc. of Berkeley, California. The Arkansas location, Steep Hill’s first in the southeast, is owned by pharmacist Brandon Thornton and former Windstream COO Brent Whittington.

Newport Hopes to Hear Boom

In rural Jackson County, officials and economic planners who have fought depopulation and job losses from an agricultural downturn, expect the two cultivation centers at Newport to generate 70-100 new jobs at average pay of $40,000 to $50,000 a year, adding momentum to a recent upswing in manufacturing.

Payroll at the centers could top $7 million within a year or two, when Parker expects the state to have 35,000 to 40,000 medical marijuana patients.

“If both grow sites are similar in size, which I think they will be, that will mean $7 million in new payroll reflected back into our economy,” Newport Economic Development Director Jon Chadwell told Arkansas Business. “Both companies are going to contribute heavily to nonprofits in the area, and I think opportunities exist for spinoff businesses to come in.”

Revolution Enterprises, one of the last privately held major multistate marijuana producers, announced its arrangement with Delta this month.

The effect was fast and profound, said Parker, who joined De Souza and Revolution COO Oleg Movchan at Nexus coffeehouse in downtown Little Rock to explain the deal. Also present were Delta Medical CEO Doug Falls, owner and president of Trinity Lighting and a former member of the Arkansas Economic Development Commission; and COO Ray Osment, a Jonesboro car dealer and developer whose wife, banker Deana Osment, is now on the AEDC.

“Illinois lines up neatly with Arkansas in regulatory framework, said Osment, Delta’s COO. “A lot of states, like Colorado and Oklahoma, are a different world, with hardly any regulation. We feel Arkansas got it right, and Illinois aligns with that. It’s helpful that Revolution knows where the guardrails are.”

Mark De Souza

Revolution advised Delta to re-envision its layout at the Newport site, opposite the state prison for women. “We filed to change the design and layout, and that was driven by conversations with Revolution,” Parker said. “They helped us redesign our footprint to be much more efficient and to enable us to increase our production.”

The indoor cultivation center, on 5 acres bought for $218,000 from Newport businessman John Conner, will have grow areas, a post-harvest drying room and packaging space for the dried flower. It will also include a lab and kitchen for extraction and producing edibles and other derivatives. Delta employees will train at Revolution’s 75,000-SF production center in Delavan, Illinois.

Overcoming a Challenge

“We understand what the medical user community needs, especially when it comes to certain conditions,” De Souza said. “We look forward to providing that to Delta, and making sure that employees know how to create these products.”

Construction could end in November, Parker said. About three weeks beforehand, Delta will schedule a state inspection, the final hurdle to starting a crop. Products made with Delta Medical’s cannabis could be sold under the Revolution brand, but that remains undecided. “The guys at Revolution have done well working with state regulators, so we’re hoping that they can help us make certain we do everything right,” Parker said.

The challenge to Delta’s license raised last year alleged unpaid taxes by some Delta owners, but Parker said those allegations involved defunct LLCs. “We were contacted last December by the ABC Enforcement [division] requesting information on allegations raised by unsuccessful applicants,” Parker said. “We provided all information requested and since December there has been no follow-up. ... We believe the information which we provided was sufficient to address the baseless allegations.” Questions about the case emailed to a state spokesman went unanswered.

Delta Medical’s owners are Falls and his wife, Jacquelyn; Parker and his wife, Lynn; T. Michelle McKee and her husband, John; Amy Fulkerson; Penelope A. Stanley; and Tracy Johnson.