Cannabis Lab Safety: What Investors Need to Know

8/03/2018

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Entrepreneurs in the cannabis space will know that opportunities within the industry are always changing. What was once a highly profitable niche yesterday has suddenly become oversaturated (and far less profitable) today. There’s certainly no shortage of money pouring into the market, and hungry new investors are ready to throw cash behind any new opportunity that looks like it will achieve greater-than-average returns.

Today, commercial laboratories for extraction are an increasingly attractive option for new investors. You could say that the shift in industry opportunities has gone from growing, to genetics, to extracts, to equipment, peripherals and supply companies — and the industry keeps on evolving. New niches spring up every day, and thousands of competitors readily jump on whatever appears to be the latest money-making trend.

In short, more and more unqualified entrepreneurs are now finding themselves in the position of building a large, and potentially dangerous, laboratory.

A recipe for chaos

Extreme investor hunger, a strong desire for newcomers to enter one of the fastest-growing entrepreneurial spaces out there, and a shocking lack of scientific knowledge can, however, create a recipe for disaster.

There’s a strong perception amongst outsiders that the cannabis industry offers “easy” money. But, like any gold rush, the easy targets have largely been picked clean. There are ways to make more money, but they are increasingly more complicated and scientific in nature.

Does anyone even remember chemistry 101!?

We believe that education is the responsibility of every would-be lab owner. Just because you can afford an F-16, doesn’t mean you know how to pilot one. And in our space, just because someone can afford top-of-the-line laboratory equipment, it doesn’t mean they know how to operate it correctly.

Yet, for some reason, people invest hundreds of thousands of dollars in building laboratories with absolutely no knowledge of the science behind these complicated processes, or how these machines actually work. They don’t know the dangers, they don’t know the common pitfalls, and the desire to do things correctly is outweighed by the desire to make money fast.

Safe and successful

So, what are some of the “unsexy” parts of running a commercial lab? Here’s a small sampling of things any would-be lab owner should be concerned about:

  • Hair length – Are you going to set your hair on fire?
  • Proper footwear – Sandals, slippers, and open-toed shoes won’t cut it.
  • Pants – denim or better is desired, avoid plastic/workout pants, “fabletics” and more. What would happen if you spilled acid on any of your clothing?
  • Do you have an eyewash station?
    • …a fire extinguisher?
    • …a mercury clean-up kit?
    • …the right gloves?
    • …a spill containment platform?
  • And what about chemical disposal?
  • Can you store potentially volatile chemicals properly?
  • Does your space need ventilation? If so, what type and how much?
  • Do you meet all the right electrical requirements?

These are just a small sampling of the many, many issues that irresponsible lab owners ignore.

Of course, when people accidentally set something on fire — or worse — ignorance is often to blame. A small group of thoughtless, money-hungry people can give a bad name to cannabis as a whole and paint the picture of an incompetent industry.

Yet, serious people know that understanding the extensive safety requirements of a commercial laboratory is absolutely essential.

Financial consequences of improper lab build-outs

In addition to the issues that can cause damage to persons or property, there are many decisions a lab builder must make about what equipment to buy.

Decisions like:

  • What’s the desired/expected capacity?
  • Are you going to routinely push under-qualified equipment beyond its capacity?
  • How long will you run your equipment without a break?
  • Do all the individual components match up?
  • Is the hardware reliable? UL/ETL listed?
  • Are you providing the right vacuum level for your runs?
  • and much more.

Failure to get any/all of these right could at best result in a massive loss of money/investment, and of course, could have potentially dire consequences. And yet we see people doing this every day. We see people opting for the most economical piece of equipment over the safest time and again. We see people rushing into an industry they know nothing about. And of course, we see massive failures – and even personal injury – all around us.

But there’s hope! Because, of course, all of these things can be avoided by people who are willing to put in the time to do it right. So I beg you, don’t try to do this alone. Don’t try to do this by yourself. Don’t go for the cheapest option or the minimum viable solution.

What should I do?

At the very least, contact a reputable company with experience in the space. Find people who’ve built out numerous laboratories before with an extensive track record. If you’re going to buy equipment, make sure it’s from a company that won’t up-sell you things you don’t need. Don’t go for “one-size-fits-all” solutions — make sure that your lab is tailored to your exact space, budget, and requirements.

And of course, if you’re not well-versed in all of the problem areas listed above, hire a contractor to do it for you. Avoid fly-by-night operations, and follow the only maxim that if something looks too good to be true, it probably is.

At the end of the day, it’s about common sense. And yet, again, it’s not as common as we’d hope.

If you want to have a chance of surviving in this increasingly complicated industry, give yourself and your lab the best possible chance of survival. Don’t go it alone.

Note: This article was contributed by Ross Palmer, the head of digital marketing for Lab Society.

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Afzal Hasan: Cannabis Industry Investments and Acquisitions

8/02/2018

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Afzal Hasan is the President and General Counsel for CannaRoyalty, a Canada-based investment firm with cannabis acquisitions in Canada, California, Washington, Oregon, Florida, and Puerto Rico.

In this episode of the Ganjapreneur.com Podcast, Afzal joins host TG Branfalt to discuss his transition into the cannabis space as a high-level corporate attorney; the strategies being used to grow CannaRoyalty’s business acquisitions; the state of the cannabis markets in Canada, California, and beyond; his recommendations for identifying a winning cannabis investment; and more!

Tune in to the interview via the media player below, or you can scroll further down to read a full transcript of this week’s Ganjapreneur.com Podcast episode.

Listen to the podcast:

Read the transcript:

TG Branfalt: Hey there, I’m your host TG Branfalt and you’re listening to the Ganjapreneur.com podcast where we try to bring you actionable information and normalize cannabis through the stories of ganjapreneurs, activists and industry stakeholders.

Today I’m joined by Afzal Hasan, he’s the Executive Vice President of Corporate Development for CannaRoyalty, which operates and invests in canna businesses in Canada and the US. You guys have been making a lot of moves lately, especially in California, and I do want to get into that. Before we do that, how you doin this afternoon Afzal and tell me about how you got into the cannabis space?

Afzal Hasan: Excellent, well thank you sir for having me on here. It’s definitely a great opportunity for us and I’m very excited to share more about this story with you. It’s been a very busy past 24 hours for us. Go ahead and take a look at some of the stuff that’s been going on our newsfeed and I’m sure we’ll be talking a little bit more about that today. But to your question, cannabis industry, I started probably officially in a professional sense about three years ago.

I worked on as a lawyer over at my old firm, Castles Brock, the listing of a company called Bedrocan when then went on to be one the core pieces that formed Canopy Growth. Since that time I worked on a handful of other listing type transactions as a securities lawyer for various companies and CannaRoyalty was the last one that I worked on. I loved the platform so much that I really wanted to jump on board and thankfully the stars aligned and they took me on. It was really a pretty special occasion and has represented a great opportunity. This industry and space is quite special in a lot of different ways and so I’ve been pretty excited to be on board for the past year and change.

TG Branfalt: So you have some other broad experience in high-level positions including the Ontario Securities Commission which for our American listeners is the regulatory body for stocks in Canada, one of them. Why’d you decide to move away from the more traditional industries and into this space?

Afzal Hasan: It’s a simple answer and it’s a huge answer that I think drives it for a lot of different people. I mean we’re sitting at an historic juncture in history. It’s a time where you have a market that is pretty active and thriving in the black markets that is transitioning into the legal and I don’t know that there really is any parallel for this in human history. You take a look, the most often used comparison is the legalization after prohibition, but what I often point out to people is that prohibition was only a blip in time for the vast majority of time in human history, alcohol has been a legally consumed substance in a lot of different jurisdictions. That is quite different from a substance that has traditionally been on the verge or on the fringe of legality for most countries and especially in modern history has been very much so on the black market side of things.

That opportunity as both a lawyer and an entrepreneur was huge. To participate in something that is actually, an event like this, and to participate in shaping the course and direction of wherever this industry is going is a massive opportunity and what I can tell you is that because of our position and what we do, we’ve been involved in actually helping shape that direction as well. With both regulators and our relationships with them, and our commitment to trying to be in front of the curve of regulation where that’s going, also in the business sense as well. It’s a huge part of where we see ourselves, on the cutting edge of the cannabis industry.

TG Branfalt: So tell me about, and tell our listeners about the evolution of CannaRoyalty. Before we sort of plugged in, hit the record button on the podcast, you had said that the company moving sort of away from this investment style to an acquisition style. Can you just sort of walk me through your experience with CannaRoyalty and how it has evolved and why it’s taken that route?

Afzal Hasan: Absolutely. I don’t know that the core vision for the company has really shifted or evolved much, but the way that we’re going about attacking it has certainly changed quite dramatically over time. If you’d gone back three, maybe two years ago when the company was still at some of its early stages, what it looked like a little bit more than what it is right now is a diversified investment vehicle. The company was making investments into a variety of different things and generally they were passive or non-controlling. We were really trying to play the growth of the cannabis industry.

What we started to realize after doing that for a little while is just that the opportunity that was in front of us and in front of the whole cannabis industry was so huge that playing it through passive investments would probably not do it justice. Moreover and on top of that, the cannabis industry is at a really early, early stage right now. You certainly will have winners in this industry in the long run, but what I can conclusively say as an investor in this space for now a year and change myself personally, and three years for CannaRoyalty, is that we have limited senses of who is going to be on top of that industry and dominating that industry in the future.

Oftentimes, and what has really been a focus for the industry in the past few years has been cultivation. The view that we’ve espoused from the very outset is that cultivation for the most part is really gonna turn into an agricultural function and if you take a look at companies right now, especially if you take a look at Canadian companies that are listed and priced, their market capitalization and values assume that they’re gonna go much further past cultivation and really be stalwarts and dominant forces in this industry.

What we’ve realized through our investment activities is that trying to call the shots on whose gonna be the next Coke or Pepsi or Diageo of the cannabis industry right now is a very, very difficult proposition. You’re really shooting in the dark if you take the typical private equity rule that you’re gonna get one in 10. I would posit that it’s a much higher number to figure out how many runs you get in as a passive investor in the cannabis industry just because the whole industry is transitioning out from the black to the legal in a variety of different places on an ongoing basis and moreover, regulations and how its actually accepted into culture, that’s all shifting and evolving too.

So to be able to call it in advance is a really difficult exercise and we realized that what would be more powerful for us and what would ensure that we’re actually going to be there and around for that time in five or 10 years when this industry is really roaring ahead as we expect, is to build the platform that ensures that we’re a part of that industry. Rather than assuming that we are going to be the Coke or Pepsi or Diageo of the future, which is, I mean those are models I’ve used to emulate for our own business, we’re building a platform that will allow us to keep trying at it so that eventually we do end up with what is hopefully the Coke or Pepsi or the equivalents in Diageo’s portfolio of brands that they hold in the alcohol industry in the future.

That is inevitably going to involve some brands that we try or others try that either don’t do well or just have a limited market niche if you will. In that process of trying out a number of different things and having a platform that allows us to try a number of different things, our hope and expectation is that we’re really providing for the certainty of both ourselves and our shareholders, investors that we will be holding some of those brands at the end of this race.

TG Branfalt: If we look towards, we can talk, we can look to what your most recent acquisition in California of River Distribution and paired with your previous acquisition of Alta, you guys are obviously in California already targeting distributors. What do you look for broadly when targeting acquisitions and what’s most likely to make a business stand out to you?

Afzal Hasan: That’s a great question. All I would say as a general proposition is that there is no general proposition for investment strategy. What you’re seeing with the River and the other two acquisitions which we closed yesterday, which are Alta Supply which is another distributor and then Kaya Management, which is a manufacturer, is a strategically driven acquisition platform. What we have done is tried to secure the distribution pipeline in the state of California for a variety of reasons.

You could take a look at our press release that we issued yesterday on River Distribution. You’ll note that one of the major things for us is that distributors in California act as major gatekeepers in the market. They are responsible for testing and ensuring the products that get to consumers are clean and safe for them. They’re also responsible for collecting a lot of state taxes as well and remitting those to the state. They serve as a central point between manufacturers and retailers. Under California law, you are required as a manufacturer to sell your products through a distributor to a retailer and vice versa, as a retailer you’re required to purchase your products through a distributor even though a manufacturer might have put it together, with some limited exemptions for vertically integrated companies.

Because of that distribution was a huge part for us in building the platform that we are assembling. The platform is really designed to allow us to really jump into the cannabis consumer products market and have the flexibility to go at it with a number of different brands and products, with the expectation again that some of them won’t be the winners. I don’t know that I have any embarrassment or shying away to say that there’s gonna be plenty of products that people produce right now and it might include some of ours, that will not be the home runs in the long term, but what I do know is that those are all gonna be valuable experiences for us and they are gonna contribute to us finding those brands that are gonna have the long term value in the future.

For us it’s important that we have the infrastructure and platform that’s needed to be able to try a few times because, to go to my early point, we’re not trying to hitch our cart to just a single brand horse, which is a strategy that a number of companies have followed and more power to them for going down that path, but it’s not one that we see as being viable given our history and our background in this space as well. That’s the higher level plan, is really assembling that platform. Distribution is a key part because what that does is it ensures that we have access to retail shelves. In theory we could be looking to acquire retailers in the future, but one of the key factors and considerations for us is that you buy a retail location, but you’re limited in terms of what you can do with that. Ultimately, you can only drive a certain number of sales out of a particular spot because it’s geographically limited and the state of California is huge.

Rather than try and buy up retail outlets to give us access to consumers, we’ve decided to follow the strategy of actually going at it with distribution and with our acquisition of Alta Supply, combined with our proposed acquisition of River, we expect to be serving a majority of the retail, well we already are between the two of those companies serving a majority of the licensed retailers in the state of California and we’re really going to be looking to reinforce that position for future.

In terms of what’s next, I mean, I can provide the general strokes, which is really just that we are going to continue to develop the platform that supports our brand portfolio in California. There is a variety of different functions and horizontal areas in the cannabis industry that we are looking to target, but suffice to say, all of it is really gonna be focused on supporting that platform and creating an entity that can support the growth of a number of different brands.

TG Branfalt: I want to dig a little deeper into, from an investor’s standpoint, what CannaRoyalty offers and definitely want to talk to you about the Canadian legalization as something that a lot of Americans, we’re not either too familiar with or we don’t, we just don’t understand it. But before we do that, we gotta take a break, this is the Ganjapreneur podcast, I’m TG Branfalt.

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TG Branfalt: Hey, welcome back to the Ganjapreneur.com podcast. I’m your host TG Branfalt here with Afzal Hasan. He’s the Executive Vice President of Corporate Development for CannaRoyalty, operates, invests cannabis businesses in Canada and the US. Man, give me the elevator pitch. Why should an investor buy CannaRoyalty stock over all of the other options that they have on the market, especially in Canada?

Afzal Hasan: I’d say it’s a good question and one that we obviously think about quite often as well. There’s different ways to take a look at it. If I was purely a numbers person and I was trying to crank that side of things, I would point you to what California is from a numerical sense versus any other jurisdiction in the world. I think without any other doubt in my mind, it really is the largest legal or regulated jurisdiction in the world for the production of cannabis. Canada has a lot of interest that has been turning, especially in the capital markets over here, but when you take into account that the market over here is not generating that much money in comparison to a lot of mature US jurisdictions, and that the total population of Canada is less than California and is also gonna be fragmented among a number of different regulatory systems with different provincial regulators and everything else, you start to realize that the financial picture is quite compelling in that California, again, offers you probably the biggest jurisdiction to operate in and therefore the biggest pie to chew on.

What I can point out to investors is if it wasn’t already clear with some of the moves that we’ve been making, California is a market that we see as being very important and one that we’re very squarely focused on. From a numbers perspective, I point out that we’re California focused and that should be a huge driver for somebody that’s looking at the numbers and market size and everything else.

Some of the other things that make California interesting and really tied to where our strategy is, just what California represents in the global culture of consumption. You could debate this to some extent, but I think it would be relatively well accepted that California actually is one of the few places in the world that shapes world culture and consumption. The media, the advertising, the etymology, cultural memes and trends, the things that get formed in California have and will continue to be exported into the human psyche across the world. That to us is a very strategic and special advantage as a company that is ultimately focused on creating a house of brands in the long term.

I mean, just to be crass about it, if we were going at this strategy in Canada, I would be quite doubtful as an investor that I’d ever be able to export that brand equity in a meaningful way across the world. The examples of Canada exporting brands across the world are extremely limited and to assume that that is gonna happen in any meaningful way is a bet that I wouldn’t want to be making as an investor.

Conversely, if you take a look at California, it is probably one of the most, if not the most discerning marketplaces in the world given it’s rich cultural heritage and the position that it plays in media and everything else. Over and above that in the cannabis industry, it’s also got a very rich background in history. What that means is you have some of the most discerning consumers in the world too. Rather than going to a state which has four licenses or nine licenses granted and assuming that we’re gonna be monopolistically cornering some part of the market because of a regulatory constraint, then hoping that that is what’s gonna drive our business, we’ve chosen California, not because it’s easy, but because it’s hard.
I hate to use a quote, but we are hoping, and our plan is to be able to generate a brands portfolio in the state of California that stands up in California because we’re quite confident that if we can do that in California, exporting it and transforming it across the world will be a pretty easy second step in comparison to having done that in any other jurisdiction across the world. There is another upside over there in terms of our California focus which then leads me to one of the other major reasons why the consumers should be taking a look at us, as consumer, investor, whatever it might be, as something that is really interesting.

At CannaRoyalty we really aren’t focused on any particular facet of the cannabis industry in terms of being a cultivator for example or purely a distributor, or purely a retailer, or whatever other horizontals you might have in the industry. What we’re looking at is ultimately that interaction between brand and consumer that keeps the consumer coming back again and again and again. That is in both a very simple concept, but also a very difficult thing to change and alter and create in consumers’ minds. Right now what I point out is that cannabis specifically had a cultural association and a stigma with illegal activity, non-productivity and all sorts of other negative stereotypes.

I think we’re slowly starting to see that open up, but the challenge that remains ahead of us and the many other companies that are looking to attack this industry is actually looking to secure a position in the cultural fabric of society that creates rituals and consumption patterns that are normalized and accessible to anybody. That is where our cannabis products fit in. Ultimately, in order for us to create a consumer product that consumers want, we really need to stretch beyond just putting a product on the shelf and really look to provide information and knowledge and cultural intervention in a sense for consumers to understand where that product fits into their lives and why they would want to be using it.

That is a mission that I don’t that you see with many, if any other companies and if you take a look at Canadian licensed producers, they all operate in what is purportedly a medical system. So facially what they continue to tell everybody is that they are medical companies. That isn’t quite the same mission that we have. I fully support and I think there is an immense plethora of uses for cannabis in the medical realm, but we are unabashedly not a medical company in the sense of actually trying to create medicine to prescribe to consumers. We are providing cannabis products and that fits into an adult use or health and wellness or whatever you want to call it. Those products can be used for consumers for whatever purpose they are allowed to use it for and as they choose to consume it. We are certainly not a pharmaceutical company and we don’t have that identity conflict that you might see with a number of other companies that have come out of a purely medical stance.

Those three things that I kind of walked through, those would be probably the major things that I’d point somebody to, to understand CannaRoyalty better and why it is different from pretty much anybody else that’s out there.

TG Branfalt: I will say this, it’s all really good point, focusing on California, you mentioned the population difference between California and Canada, but for me it’s really interesting that a Canadian company is focusing so much on a US market being that everybody right now is looking towards Canada’s federal legalization with sort of open eyes just wondering how this is gonna work because there’s Uruguay who has a very limited recreational, adult use regime and Canada, I mean, it’s the first country in the West to do this. I’m a little surprised.

Afzal Hasan: It’s a fair point to be surprised about. It really superficially I think there’s some interesting points. The reality is that federal illegality in the US is a persistent overhang on the industry and that is probably why people have focused on Canada as being a leading opportunity. It only takes a very quick walk around in Denver or in Los Angeles or in San Francisco or in Portland or Seattle to really realize why that thinking and perception is just very fundamentally misguided. If I want to go out to buy cannabis in Canada, be it medical or recreational or whatever I want to call it, there is no store that I can walk into. There are no products that are available on the shelves other than a very limited number of products. In Canada the only things that are legally allowed for sale right now are flower and very low percentage oil.

You compare that to any other American jurisdiction that has a mature cannabis market, it is a world of difference. You have retailers, distributors, extractors, cultivators. You have service providers and they’re all working to produce what are ultimately a plethora of different products that consumers are consuming. Canada does not yet even have final regulations on the types of products that are gonna be allowed for consumption beyond the very limited stuff to products I had pointed out. To assume that Canada’s gonna have a leadership role in shaping the development of the cannabis industry is a bet again, that if I was staking my money, I wouldn’t necessarily be putting it there. Again, all it takes is a little bit of a walk around into the actual functioning industry to realize that the industries that you see in many US states are light years ahead of where Canada is right now from a pure business sense.

What Canada has as the advantage is federal government buy in and actually a legislative approach that is opening it up, but I’d also point out that Canada has been learning. They started off, for example, even with medical producers having quite draconian restrictions on the security they need to put into place. I’ve heard people joke for example that in some senses the security that Health Canada impose on some licensed producers was higher than maximum security prisons. Over time what you’ve seen is that Health Canada has learned through its own experience and hopefully through some looking down south of the border as well, that you don’t need to regulate a cultivator of cannabis like a maximum security prison. They’ve eased up on security requirements as well as vaults and other things like that. Which ultimately means that they are transitioning and maturing, but I think it’s another point to actually signal that Canada, while it’s certainly paving the way for federal legalization and the regulatory side of things, in the business sense and the functional sense it’s quite far behind most US states that have been involved in this industry.

TG Branfalt: I want to dig a little bit more into Canadian federal legalization proposals, before we do that we gotta take a break. This is the Ganjapreneur.com podcast, I’m TG Branfalt.

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TG Branfalt: Hey, welcome back to the Ganjapreneur.com podcast. I’m your host TG Branfalt, here with Afzal Hasan, Executive Vice President of Corporate Development for CannaRoyalty. So before the break, we were talking a little bit about the differences with Canadian legalization versus US legalization of market, maturity of these markets. What are you guys, what is CannaRoyalty looking for in the final version of federal legalization?

Afzal Hasan: What we did look for is an open and accepting market. I mean the reality is, and I use this example for a lot of people, if I take a look at a lot of different pharmaceuticals, I could probably, within the one kilometer or mile radius from where I’m sitting in my office right now, access a dozen pharmacies that have very scary pharmaceuticals locked up with security I’m sure, but they’re there. They are within a stone’s throw of where I am right now. Ultimately, I would hope that and I’d say the same thing again for alcohol too, Canada actually has a more restrictive regime than most US states on the distribution of alcohol because it goes through, at least the Province of Ontario, through eight regulated entities primarily, but even in the case of alcohol, there would be a number of different outlets that I could purchase alcohol from and they are not necessarily locked up like a very high security type of set up. They’re retailers and they have high value products that are regulated and so they’re very careful about that, but other than that it looks just like another store.

Ultimately that is what I would hope Canada would be able to transition towards. Having a system that allows for the normalized sale and production and consumption of cannabis, just like you would see for any other type of substance that is a comparable and the closest comparables for most people are alcohol, tobacco and then also pharmaceuticals to an extent.

What that means in terms of a federal, legalization bill, I really, I can’t imagine that we’re gonna see that from the outset. This is something that Canada is, rightly so, quite conservative and cautious about. You don’t want to take these first steps ahead and actually make a blunder and so what you’re probably going to see is a relatively conservative legislative framework that Health Canada works to open up over time. As I mentioned, with even the licensing process for example, I think Health Canada has displayed some great initiative and has learned from a lot of it’s experiences and I’m fully confident that with time Health Canada and Canadian regulations generally will get there, but I wouldn’t expect that on day one we’re gonna have a full and thriving market like you see with any other consumer products.

I would just also throw out there, just go into some of the previous comments that I made, there are many places in the US that do have that type of market. California is very early in that stage because it just opened up recreational consumption, but if you head down to Colorado, it’s a great example of a place where you’ve had recreational legalization in place for quite some time, you see retail outlets scattered around the state and consumption and the place that cannabis holds in society has really evolved in a lot of ways. Some of the stories that you hear from people are just phenomenal. Hearing what the tax revenue has been able to do for the state of Colorado as well as just from a societal perspective, impressive accomplishments. That is hopefully where the future leads, but probably not on day one.

TG Branfalt: So, it’s safe to say that some of the states or provinces that have announced the regulation, it’s gonna go through the various liquor boards, I think only one or two are actually going to allow private retail sales. Is it safe to say that you guys would prefer this private sales model?

Afzal Hasan: It’s not even a question of preferring it. It just comes down to simple economics. When you have an industry that is regulated by limited licenses et cetera, what you’re asking and doing is really altering the function of capitalism generally. If you do believe that capitalism at it’s core is one of the best ways to drive the efficient production and consumption of products and everything else in our society, then just inherently having a regulated system can cause a lot of issues or tightly regulated system without any private ability for intervention. I think Canada and many of the provinces in Canada have displayed a pretty sensible pattern of very carefully allowing for privatization on their own terms because you obviously have to counter balance that with society’s general interests and not having consumption that’s illegal or under age or any of the other types of issues that could crop up.

Ultimately, I’m not even sure that some of the regulators would dispute that. I mean Ontario for example, which is where we’re based out of, you have Doug Ford that has made some comments about trying to move forward with more private and open regime and I think that’s a lot of people that would be proponents of that. Hopefully, that’s what we are gonna see into the future as well.

TG Branfalt: Since it was announced that the Canadian federal government was going to move forward with legalization, the first reports were Canada Day which is July 1 and then that moved to sometime this summer, perhaps August. I’ve read a couple of reports where they suggest that because of the lawmakers wanting safe driving provisions or DW … driving while stoned provisions before they allow legalization that it could take until at least December. You’re on the ground there, you’re obviously very plugged in to what’s going on, when are you guys sort of anticipating sales are gonna begin? Are we looking at July 1, are we looking into later summer, or are we looking into almost 2019?

Afzal Hasan: It’s a good question. We are also trying to read the tea leaves as everybody else. I think what you’ve outlined is probably as accurate a view as any in terms of what is going on. I think the government has come out and indicated that July 1, I think the technical position is that it was never put out as a hard date for the start of legalization or recreational legalization, but the most recent accounts that we’ve been hearing is towards the end of the summer. In theory 2019, that is a possibility, but I do believe given the effort that the Canadian government has put in, the various provinces are putting in as well, that we will hopefully see legalization open up for recreational use well in advance of 2019. We have been doing a lot of work and maybe you don’t have as full a system as we would have liked on the date that the doors open, but we’re hoping as well, and all accounts are from the public sources that we see as well as any information that we get other than that it is going to be this year. As you’re pointing out, that is a shifting goal in time line and we’re watching and following along just like the rest of the market as well.

TG Branfalt: I’m sure that’s just got to be frustrating. It’s right there, you can almost taste it, but no one will give you a firm answer. We’ve talked a lot about California, you guys also have reach in the state of Washington and Florida. That’s three very different markets, especially when you consider Florida, they just sort of revamped their program, but there’s still some issues as far as people are telling me on the ground. What do you look for in a US state program that makes it appealing to enter?

Afzal Hasan: Full and open access. I think Washington’s an interesting one because our investment into that state to be clear was into a real estate company and that real estate company leases outfitted real estate to cannabis operators, but because of the fact that the Washington regulations are quite strict about out of state involvement, our exposure to that state was purely indirect to ensure that we were very much so on side of the laws and regulations of the state of Washington.

You see a similar feature in some other states. Colorado for example also has some restrictions on how out of state ownership as well. It’s something that I personally, as also the General Counsel to the company take quite seriously. I have zero interest in trying to structure creative investment structures to circumvent and avoid the application of state law and I won’t name names, but there are a plethora of other companies that are trying to structure those deals.

Our own view is that there are a multitude of opportunities for us to access across the US and again particularly in California, in jurisdictions that have been welcoming to us. California has some specific rules that allow a public company to invest into the state through licenses and everything else. That is the type of state that we want to be invested in. Somebody that is coming in and opening their arms to a public company like ourselves getting involved over there. That’s something that we’ve seen reiterated and supported by local state regulators as well. So we’ve had extensive contact with a variety of different local regulators in the state of California and without question, what you’ll see is a very open and welcoming environment.

That isn’t the case necessarily in most US states and that is one of the biggest drivers for us, is really the fact that they want us in there because we have no interest in trying to force our way in to a state because that is really just a disaster waiting to happen.

The other side of it too is just as open and rational market as possible. California, again, is a really example of a market where you have a wide variety of product categories that are permitted, you frankly can manufacture almost anything provided that it fits within the safety and other requirements for … protection, everything else, which for us as a products company is great. We need to be able to experiment and be agile and everything else. That is not necessarily the case with a lot of other US states that have restrictions on the types of products that you can put out there as well as how they’re sold and what types of markets.

TG Branfalt: I could sit here and pick your brain for probably the next hour and still not get in everything that I wanted to talk about. I got to ask, what’s your advice for people interested in investing in cannabis stocks? Here in the US we don’t have publicly, we have one publicly traded company, two if you count the ETF and Canada’s a much broader market allowing for public trading. What’s your advice for those interested in investing in the space with stocks?

Afzal Hasan: My main thing to an investor would be take a really deep look at the company that you’re proposing to invest into and try and figure out where they might sit in the value chain of the cannabis industry in five or ten years from now. I point out the cultivation side of things for example. The typical assumption from our perspective when we look at the valuations of most cultivators in Canada is that the market and investors have basically priced in the fact that each one of the effectively is going to be a dominate force in all areas of the cannabis industry. I posit that they are gonna be actually very few of them that are gonna be around in the same way in five or ten years from now. If all that you’ve got in your business is a cultivation facility and nothing else unique about your company, chances are that that isn’t going to be enough to cut it as a public company in five or ten years from now and to really be a major force in the cannabis industry.

What you want to be taking a look at as an investor is really the companies that are investing into the future of the cannabis industry and the future industries. Even though cultivation, for example, is the major play in Canada that people can actually invest into right now, you will see that some of the more prominent companies are making in roads into trying to acquire products as well as retail space and everything else. Even with those moves as well, I’d encourage people to be very careful and astute about what exactly somebody is doing in the space because there are a lot of announcements and developments that we’ve seen out there that have left us scratching our heads even though superficially somebody might say that they’re getting into retail, I wonder how much some of these opportunities and investments that people put money into will actually yield results that make any sense in the long term.

My advice to an investor is you should actually have good sense and understanding of the cannabis industry if you really want to play in here. People have been making a ton of money throwing darts against a wall and frankly if you put money into the market with anybody last year, you probably would have made multiples of your investment over here. That maybe will continue on for a little while, but ultimately in capital markets, and the true winners will prevail. The only way that you’re gonna be able to pick those winners is if you understand the cannabis industry yourself.

TG Branfalt: You’re Vice President to Corporate Development, you’re General Counsel, you’re obviously extraordinarily passionate about being in this space. You left a very high-level positions to enter the cannabis industry, which takes a lot of guts. You’re an entrepreneur man, what’s your advice for other entrepreneurs seeking to enter the cannabis industry?

Afzal Hasan: I think the best thing I could say and it’s just really generic advice for people as well, but I think all the more relevant in this industry is really to pick a part of this industry and focus on it. As a public entity we’ve picked an area of the industry, being consumer products and brands, that we focused on and it is a huge thing that we’ve bitten off, but we also have the resources, and access to capital and access to actually acquisitions that make that a real possibility for us.

If it was just me by myself, my ambitions would no way they would be that grand and ambitious. I would rather, as a personal entrepreneur, a smaller entrepreneur pick a very specific part of the market, focus on that and do something well. That could be anything from, maybe I cultivate really good cannabis and that’s what I want to do. Maybe I feel like I’ve got the best extraction technology or the best focus on extraction and that’s what I do. And so on and so forth. I think the biggest danger that we have seen in the market, being an investor is just in entrepreneurs that try and attack the world because they feel and see that there are so many opportunities over here and they should be attacking all of them.

Suffice to say, that strategy could work out if you were a global behemoth and had the resources and the foresight and the vision to be able to accomplish all that, but especially as an early entrepreneur, I would very much so caution against trying to run a vertically integrated company that is doing everything under the sun in the cannabis world and instead focus on something, which could be very simple and to the point, like I make containers for cannabis products. It doesn’t sound glamorous, it doesn’t sound amazing, but somebody needs to do it and somebody will do it well and they will corner that part of the market. Better you do that and actually have a chance of succeeding on something then try and bite off the world and find that you’ve made a very poor run at it.

TG Branfalt: Well man, this has been really one of the most insightful conversations that I’ve had on the year that I’ve been doing the show, so I really want to thank you for taking the time out. I want to congratulate you for your recent successes, acquiring Alta Supply, River Distribution. Where can people learn more about CannaRoyalty?

Afzal Hasan: Best place is to hop onto our website. We’ve got a fair amount of information about the company, our holdings, and everything else. You’ll also be able to access our investor presentation, which is a good visual overview and we’ll also have links on there to access more detailed public filings as well. So that’s the best place to access information about CannaRoyalty. Just on behalf of CannaRoyalty … we thank you again for having me on here, it was a great experience for me to try and share a little bit of this because just reading our disclosures might be more dry and less explanatory than what most investors need. The only thing that I tell people who want to know more about our company is just keep watching us and we’re only really getting started over here and there’s plenty more fun to come.

TG Branfalt: Again, I really want to thank you for taking the time to come on the show and we’ll definitely be keeping an eye out. You guys are making a lot of moves, they’re coming weekly. It’ll be an interesting time to be a cannabis journalist when there’s companies making just such fast, quick moves in this space.

Afzal Hasan: We share the same view as well and it’s something that we’re very excited about. Thanks again for having me on.

TG Branfalt: You can find more episodes of the Ganjapreneur.com podcast in the podcast section of Ganjapreneur.com and in the Apple iTunes store. On the Ganjapreneur.com website you will find the latest cannabis news and cannabis jobs updated daily, along with transcripts of this podcast. You can also download the Ganjapreneur.com app in iTunes and Google Play. This episode was engineered by Trim Media House. I’ve been your host TG Branfalt.

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Conservative-Backed MMJ Campaign Launches in Mississippi

8/02/2018

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A 58-person steering committee, including many prominent conservatives, announced a campaign to put a voter initiative for the legalization of medical cannabis on the 2020 Mississippi state ballot, Mississippi Today reports. The campaign, “Medical Marijuana 2020,” was officially registered by Ashley Durval, who made headlines in 2014 when she fought for her daughter’s right to access CBD oil as an epilepsy treatment.

The steering committee counts four Republican lawmakers, the heads of two conservative advocacy groups, and the president of “Mississippi Christian Living” magazine as members.

The plan calls for heavy regulation from Mississippi’s Department of Health, including ID cards and monitoring of treatment centers. Many of the conservative backers think that regulations are the key to making this initiative successful, though are some are aware of the irony of conservatives backing government regulation.

The state’s last initiative to legalize cannabis was registered by Kelly Jacobs in 2015 and was directed at complete adult-use legalization. It did not even make it onto the ballot.

“Practically we’re talking about medical marijuana here, we’re not talking about recreational drug use. It really seems like kind of a no-brainer to me, but because the word marijuana freaks people out, people who would normally be for these freedoms but have seen the negative impacts from drug problems, can’t disassociate those two.” — Jon Pritchett, via Mississippi Today

It is challenging to get an initiative on the Mississippi ballot: 100,000 signatures are needed and at least 20,000 must come from each congressional district. Jacobs said that, even while attempting that single daunting task, she received enormous resistance from officials in communities across Mississippi, increasing the difficulty exponentially.

Gov. Phil Bryant, in a Facebook post, announced that — if the initiative makes it to the ballot — he plans to veto. “Medical Marijuana 2020” has two years to change his mind.

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34 Arrested In San Diego Cannabis Delivery Crackdown

8/02/2018

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One year ago, the San Diego Police Department (SDPD) launched a targeted crackdown on illicit cannabis delivery services in the city; yesterday, a report published by the SDPD disclosed the results so far of that crackdown: 11 delivery services have been shut down and 34 individuals have been arrested. Police also confiscated business records, 230 pounds of cannabis, and $60,000 in cash.

San Diego’s illicit cannabis delivery services remain a popular option for consumers, however, according to an NBC 7 report.

Cannabis advocates and business owners have argued against the crackdown, saying that legalization and regulation — not enforcement — is the best way to control the marketplace.

“The black market is absolutely flourishing. It’s just getting bigger and bigger. … If you want the black market to go away, give them a path for legalization. If we have the same opportunities to be licensed and to be regulated, all those issues would kind of disappear the way they have with the legal dispensaries.”” — Elizabeth Wilhelm, former owner of Timely Holistic Care, via NBC 7

San Diego does not allow for delivery-only services — only licensed dispensaries with an actual storefront can make deliveries, and only in specific zones in the city.

SDPD Lieutenant Matt Novak told the City Council’s Public Safety and Livable Neighborhoods subcommittee in December that, because of “their mobility and multiple storage locations,” investigating the robbery of a delivery service poses “a much more lengthy investigative process” than for licensed storefronts.

“For the time that it takes to investigate a storefront marijuana robbery, it takes about twice the time to investigate a delivery service robbery.” — SDPD Lt. Matt Novak, via NBC 7

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Oklahoma Reverses Restrictive Medical Cannabis Rules

8/02/2018

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This week, the Oklahoma Board of Health reversed some of the restrictive medical cannabis rules it passed earlier this month without democratic support, according to a Star Tribune report. The reversals included many controversial rules first passed by the Board, such as a ban on smoking cannabis, requiring a pregnancy test before dispensing marijuana to a woman of “childbearing age,” requiring a pharmacist to be at every dispensary, and limiting the THC content of plants.

“The actions taken by an unelected group of health officials in Oklahoma were egregiously undemocratic. We are heartened to see them now reverse course, but they should have never attempted to meddle with a voter approved measure in the first place. It is our hope that state officials take heed at the nearly unanimous backlash they faced due to these actions and move to swiftly enact SQ 788 in the patient-centric manner the ballot language called for.” — Erik Altieri, Executive Director of NORML, in a statement

The Board of Health was cautioned by the Oklahoma Attorney General Mike Hunter in early July that it was acting outside of its authority by attempting to limit the scope of State Question 788, which legalized medical cannabis. The Board was urged to reconvene and write new rules.

The next step in the process is to get Oklahoma Gov. Mary Fallin to sign the re-written rules into effect — which she did for the previous controversial set of rules the very next day, despite warnings from the Board’s attorney. This time, Gov. Fallin’s office said the governor wants to review the guidelines with her legal staff — she has 45 days to accept or reject the new rules.

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Molson-Coors Latest Big Alcohol Player to Invest in Cannabis

8/01/2018

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In an effort to battle falling beer sales, Molson-Coors has embraced Canada’s legal cannabis market by partnering with The Hydropothecary Corporation to create a cannabis beverage startup, according to a Wall Street Journal report.

The startup formed by the partnership will stand alone, with its own board of directors. Molson-Coors will own 57.5% of the new startup corporation and Hydropothecary Corp. the remaining stake. Molson-Coors Canada CEO Frederic Landtmeters said Molson-Coors’ goal is to create high-quality products that meet consumers’ “evolving drinking preferences.”

Quebec-based Hydropothecary Group, Molson-Coor’s partner in the venture, is publicly traded in Canada as HEXO. Shares rose nearly 25% today after the announcement. HEXO aims to be one of the largest cannabis producers in Canada and is on track to produce more than 100,000 kilograms of cannabis once the company’s warehouse grows are fully licensed and operational.

Molson-Coors said in a press release that the company is “aggressively addressing” its declining beer sales in the U.S. and Canada. Global sales volumes have fallen 2.4% in the last quarter. Other beer companies are facing similar market changes as more states and countries legalize cannabis.

Constellation Brands, makers of Corona, as well as Heineken and the startup Cannabiniers are all entering the cannabis beverage market.

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Canadian Cannabis Growers Will Be Federally Subsidized

8/01/2018

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Canada’s federal government will provide some of the same subsidies to cannabis growers that it does to traditional agriculture operations when the cannabis market opens later this year, Forbes reports. Agricultural ministers from all levels of Canadian government decided during an annual meeting in Vancouver to allow cannabis growers access to the same programs that support food farmers. Cannabis farmers were not on the original list of possible benefactors of the program because it was drafted a year before legalization.

All levels of the Canadian government — federal, provincial and territorial — work together inside the same funding structure for subsidies, known as the Canadian Agricultural Partnership.

Not all of Canada’s agricultural support will be offered to cannabis growers just yet, however. Two of the best-funded programs in Canada — AgriStability and AgriInvest — will not be made available to cannabis growers until the market has matured. These programs insure farmers against massive market fluctuations and large-scale crop destruction, which is a risk that start-up cannabis companies will have to accept.

Officials have not yet determined the full scope of programs that will be applied to cannabis growers, but entrepreneurs in the industry are most interested in subsidies for environmental impact and innovation, which are still on the table.

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Pennsylvania MMJ Flower Sales Launch Today

8/01/2018

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Medical cannabis patients in Pennsylvania can purchase flower under the state’s MMJ program starting today, according to a press release from the office of Gov. Tom Wolf.

A total of 16 dispensaries in Scranton and Williamsport started offering dry flower products on Wednesday; the product will launch in Edwardsville and State College next week, bringing the total number of dispensaries with flower products up to 28.

Previously, patients could only purchase cannabis-infused oil or pills as medicine.

“The dry leaf form of medical marijuana provides a cost-effective option for patients, in addition to the other forms of medication already available at dispensaries. It’s important to note that not all dispensaries will have this medication on Aug. 1 and patients can visit our website at www.medicalmarijuana.pa.gov to see when their local dispensary will have it available. It’s also important to talk with your doctor or the medical professional at the dispensary to see if the dry leaf form of medical marijuana is an option for you. Dispensaries will continue to have other forms of medical marijuana, such as oils, pills, topicals, etc. available.” — Secretary of Health Dr. Rachel Levine, in the press release

Dr. Levine also warned that the flower products are “available for vaporization only.”

“It is illegal to smoke the medication. Please make sure that when transporting your medication, you keep it in the original container and have your medical marijuana ID card with you.” — Dr. Rachel Levine, in the release

There are more than 52,000 patients registered with Pennsylvania‘s medical cannabis program, but just 30,000 have actually received identification cards and are able to shop at dispensaries.

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The Pennsylvania Capitol Building pictured in Autumn.

Cannabis Legalization and Expungement Legislation Planned in Pennsylvania

7/31/2018

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Pennsylvania state Rep. Jake Wheatley plans to introduce a bill to legalize adult-use cannabis and expunge the records of people convicted of minor cannabis crimes, according to a report by the Pittsburgh CityPaper.

Pennsylvania’s medical cannabis market launched in February. Earlier this month, the Auditor General of Pennsylvania released a report indicating that an adult-use market would generate $581 million in revenue for the state — far more than a closed medical market — in addition to saving on enforcement costs.

“States from coast to coast have embraced legalization and those states are reaping the economic and criminal justice benefits. It is time Pennsylvania joins with those states in leaving behind the ugly stigma of marijuana.” — Rep. Jake Wheatley (D-Hill District), in a statement

Several prominent lawmakers and officials in Pennsylvania, such as Pittsburgh Mayor Bill Peduto, support cannabis legislation. A poll from Franklin & Marshall College in September 2017 found that 59 percent of Pennsylvanians favored adult-use cannabis legalization.

The primary obstacle to enacting any legalization legislation is Pennsylvania Gov. Tom Wolf, who — although he is a supporter of medical cannabis — has not signed on for a full adult-use market. State House of Representatives Speaker Mike Turzai, a vocal cannabis opponent, is also a roadblock to adult-use reforms.

House Republicans spokesperson Stephen Miskin pointed to intoxicated driving and speculative revenue numbers to explain the Party’s opposition.

“Legalizing marijuana? Why not legalize heroin, why not legalize cocaine?” — Stephen Miskin, spokesperson for the Pennsylvania House Republicans, via Pittsburgh CityPaper

 

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Specialty Paint Marketed in Colorado for Controlling Cannabis Odors

7/31/2018

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A paint that conceals odors is being marketed in Colorado as a cannabis odor-blocking product. The paint, which was developed by Denver-based ECOBOND and is called OdorDefender, is designed to lock in the residue that builds up on walls and furniture — sometimes called third-hand smoke — in rooms where people smoke.

“We don’t make typical paint products. We make specialty paint products that are designed to help the environment. We’ve been doing research on not only secondhand smoke, but thirdhand smoke. There have been studies that show thirdhand smoke can be every bit as dangerous as smoking or secondhand smoke. It can re-emit to the air from the floor, from carpeting and from walls.” — Eric Heronema, ECOBOND product manager, via Westword

One of the paint’s primary effective odor-concealing ingredients is alginate, extracted from seaweed. Heronema said that alginate is “nature’s best absorbent.” ECOBOND ran tests with pieces of drywall in tanks filled with cannabis smoke, as well as tobacco smoke. Once saturated with the smell — which, by reports, was overwhelming — they painted over the various pieces of drywall with different brands of paint, running the gamut from the most common industrial paint down to home latex paint. OdorDefender did best during a sniff test after curing on several different occasions, in an experiment involving 11 people.

The paint is being marketed to managers of commercial properties, private homeowners and landlords, and home restoration companies. More products aimed at the wide-ranging impacts of legalized and normalized cannabis consumption should be expected.

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Georgia Legalizes Cannabis Consumption

7/31/2018

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The nation of Georgia officially legalized the consumption of cannabis this week in a Constitutional Court ruling, according to an RFE/RL report. The ruling, however, does not legalize the sale or cultivation of the plant.

The ruling was prompted by a lawsuit filed by activists with the Girchi, Georgia’s liberal opposition party.

“According to the applicants [Zurab Japaridze and Vakhtang Megrelishvili], the consumption of marijuana is not an act of social threat. In particular, it can only harm the user’s health, making that user him/herself responsible for the outcome. The responsibility for such actions does not cause dangerous consequences for the public.

The Constitutional Court highlights the imposition of responsibility of marijuana consumption when it creates a threat to third parties. For instance, the court will justify responsibility when marijuana is consumed in educational institutions, public places, such as on public transport, and in the presence of children.” — Georgia Constitutional Court, in the ruling

The Girchi party — which was established in November 2015 and started pushing for cannabis reforms in November 2016 — says it will continue to push for the full decriminalization of the plant. Georgia is the first former Soviet nation to legalize the consumption of cannabis.

“This wasn’t a fight for cannabis. This was a fight for freedom.” — Zurab Japaridze, activist and chairman of the Girchi party, via RFE/RL

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High Times Sells Stock Direct to Investors

7/30/2018

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Using a new public offering exemption called “Regulation A,” High Times has started selling shares of its corporation direct to non-institutional investors, according to the magazine’s investor site.

High Times has been trying to go public for more than a year. In a confusing series of announcements, the company has reportedly attempted multiple routes to listing on a public exchange. Most notably, in July 2017 the High Times Holding Corporation entered into a $250 million merger deal with Origo Acquisition Corporation — but that deal is still pending. Origo obtained permission from its stockholders to extend the deadline for closing the deal in June, pushing the date to September 12th, 2018.

The goal was to begin trading under Origo’s existing public ticker symbol, ORAC. There has been speculation about whether the NASDAQ exchange would even allow the move but, as the deal has yet to close, nothing is yet proven. However, NASDAQ has voiced concerns over issues with the High Times and Origo merger and has twice attempted to remove the company from the exchange based on technicalities.

Since 2016, High Times has struggled to manage debt created during several rounds of acquisitions and mergers. The company has been focused on fundraising to meet its financial obligations since the start of the Origo deal. High Times desperately needs at least $12.7 million for an upcoming August repayment deadline for a loan taken from Ex Works Capital.

Enter the SEC’s “Regulation A” exemption. Regulation A, or Reg A, is an exemption for public offerings from companies in amounts of $50 million or less raised over one year. Reg A allows companies to sell stock directly to the public, not on an exchange. This allows non-institutional investors to essentially crowdfund a corporation, and the Reg A offering might help the company raise money quickly enough to repay Ex Works Capital.

High Times still plans to list on the NASDAQ at a later date.

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Florida’s Controversial MMJ Director Resigns

7/30/2018

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Christian Bax, Director of Florida’s Office of Medical Marijuana Use (OMMU), has resigned, the News Service of Florida reports. Bax was often blamed for delays and difficulties in awarding licenses in Florida’s young medical cannabis market.

One of Bax’s staunchest critics is John Morgan, an Orlando trial lawyer who was the primary backer of Florida’s medical cannabis constitutional amendment. Morgan was jubilant at the news of Bax’s resignation.

“He was so inept that it had to be intentional. Anyone would be better and more capable. He was to health care in Florida what Barney Fife was to law enforcement. This is a great day for the sick and injured in Florida.” — John Morgan, in an email

Some still defend Bax, however, saying it’s easy to expect hardships when developing a market from scratch that’s expected to handle $2 billion in sales. Bax’s predecessor, Patty Nelson, passed the post on to Bax due to the job’s difficulty, choosing instead to become a private consultant.

“There’s no denying it’s a hard job. It sometimes feels like an impossible job. And you face critics from every direction, which makes it difficult to navigate.” — Patty Nelson, via News Service of Forida

Taking over for Bax is the Deputy Director of the OMMU, Courtney Coppola. Coppola’s first challenge will be a fresh wave of applications for new medical cannabis licenses; more than 400 applicants are expected for just four available licenses.

To help the process, Florida legislators earlier this month approved more than $13 million in new funding.

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Michigan Gov. Tasks State Police with Investigating MMJ Bribes

7/30/2018

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Michigan Gov. Rick Snyder has tasked state police with investigating whether there are officials taking bribes from medical cannabis operators, the Detroit Free Press reported last week.

The investigation was requested by state Sen. David Knezek (D-Dearborn Heights) and was prompted by a bribery case from last year, wherein three men gave an envelope of $15,000 cash to a Garden City city council member and suggested they had another $150,000 in escrow to handle future bribes. The men hoped to secure a license to cultivate medical cannabis in the city. The envelope was turned over to the FBI and the three men were arrested, but Sen. Knezek remains concerned.

“It is deeply concerning to me that a state official may have been involved in this serious situation. If he/she accepted funds in return for government favors, the state employee would be in violation of many sections of state law.” — State Sen. David Knezek, in a letter to Gov. Snyder

Sen. Knezek told the governor that, even though the FBI has an ongoing probe into the issue, he wants state police to conduct their own investigation.

“I am aware that federal authorities don’t always communicate the details of their investigations with state officials. It is imperative that this case not slip through the cracks and go without the state looking into potential criminal wrongdoing of its own employee.” — State Sen. David Knezek, in the letter

Michigan voted to legalize medical cannabis in 2008 but it took lawmakers eight years to establish rules and regulations for the program. Though 600 applications were submitted, just seven licenses have been awarded so far. Experts predict Michigan’s medical cannabis marketplace will be worth $700 million during its first year of operation, with the state anticipating some $21 million in annual taxes.

Michigan is expected to vote on the issue of adult-use cannabis this November, which, if successful, could lead to even more explosive growth in the state’s cannabis sector. The majority of Michigan voters approve of full legalization.

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House Bill Would Allow Federal Employees to Access Legal Cannabis Markets

7/27/2018

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A bipartisan bill in the U.S. House of Representatives would, if passed, prevent the federal government from terminating employees who use cannabis within the laws of the state in which they reside, Tom Angell of Marijuana Moment reports. The bill was introduced on Thursday by Reps. Charlie Crist (D-Florida) and Drew Ferguson (R-Georgia).

The bill would protect all civilian federal employees in all federal departments and agencies using cannabis legally within the laws of their state, for either medical or recreational purposes. The bill has been referred to the House Committee on Oversight and Government Reform for debate and consideration, before hopefully being brought to the House floor for a vote.

Over three dozen cannabis amendments have been blocked in committee by Republican leaders this year. The House Rules Committee, chaired by Rep. Pete Sessions (R-Texas), has made a project of blocking all cannabis amendments brought forward since Rep. Sessions took control. Supporters of cannabis law reform hope that Rep. Sessions will be voted out of office during the midterm elections in November.

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California Vape Cartridge Company Issues Industry’s First Cannabis Product Recall

7/27/2018

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The Bloom Brand — a manufacturer of cannabis vape cartridges, disposable vape pens, and oil infusions — and its distributor, Greenfield Organix 4th St., voluntarily issued the California cannabis industry’s first product recall on Wednesday; the alert was posted on The Bloom Brand’s company website.

The recall was issued for Bloom products containing cannabis Batch Number B-180504, which was sold in nearly 100 retailers throughout California between July 1 and July 19. The products being recalled are:

  • BloomVape 0.5g
  • BloomVape 1g
  • BloomOne Disposable 300mg
  • BloomDrop 800mg

“Batch Number B-180504 contains the pesticide Myclobutanil and does not comply with the Bureau of Cannabis Control (BCC) standards. We are working closely with the BCC to remedy this issue and expect clean, compliant products to be back on shelves in three weeks. …

“If you suspect that you are affected by the recall, please return the product to the retailer where it was purchased for a full refund. DO NOT CONSUME this product if you have it in your possession as it is deemed that it may be harmful to your health and wellbeing.” — The Bloom Brand official statement, in the product recall press release

See the press release for a full list of the state’s affected retailers — no other state markets have been affected by the recall.

This is the first cannabis product recall in California‘s newly regulated industry, which launched January 1.

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Racks of curing cannabis nugs hanging from the ceiling at a commercial grow operation.

Massachusetts Cannabis Commission Gets Tough On Municipal Profiteering

7/27/2018

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The Massachusetts Cannabis Control Commission (MCCC) made an official announcement Thursday reminding municipalities who are seeking agreements with adult-use cannabis businesses to stay within the law when it comes to negotiating financial terms, the Associated Press reports.

The MCCC said it has seen “anecdotal” evidence of communities exploiting cannabis businesses with excessive taxation and fees, which is against clear stipulations in Massachusetts‘ state cannabis law.

State law allows municipalities to charge businesses for anticipated costs of services such as road or traffic improvements, policing, etc. Host communities are not allowed, however, to charge more than 3 percent of the total annual revenue of the businesses and no arrangement may last longer than five years. In addition to the 3 percent for services, municipalities may also collect up to an additional 3 percent in taxes.

“If municipalities don’t follow that law, they are creating obstacles to the commission’s mission statement, which is to safely, equitably and productively implement the law. We already know that when barriers to entry are too high at the local level we end up with a market that is slow to start up and has a striking lack of diversity.” — Shaleen Title, MCCC Commissioner, in the report

However, the commission itself is unsure whether it has authority over the agreements made between municipalities and cannabis business owners. At least one commissioner, Jennifer Flanagan, has defended the communities, citing costs associated with substance abuse treatment that were not considered in the state’s cannabis regulations.

“Instead of hiding our heads in the sand and pretending this doesn’t exist, I really think that part of the conversation with municipalities has to be about the public health aspects of this.” — Jennifer Flanagan, MCCC Commissioner, via the Associated Press

The MCCC gave communities two weeks to respond to the directive.

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Ontario Government to Allow Private Cannabis Retailers

7/27/2018

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An insider source reportedly says the Ontario government will allow for privately owned cannabis shops when Canada’s adult-use market comes online in October, according to a CBC report. The source, who spoke with The Globe and Mail on the condition of anonymity, suggested that the government would maintain its control over cannabis distribution and online sales.

Officials under former Premier Kathleen Wynne’s Liberal administration had planned to give the Liquor Control Board of Ontario a monopoly over the province’s recreational cannabis stores. The new Liberal administration under Premier Doug Ford, however, aims to mirror the Alberta model, which will see private cannabis retailers licensed by the province’s liquor control board.

According to the source, Ontario Finance Minister Vic Fedeli and Attorney General Caroline Mulroney are expected to announce the shift in policy as early as next week. 

Premier Ford reportedly suggested in June he was considering privatizing cannabis retailers, saying at that time he doesn’t believe “government should stick their nose into everything.”

A survey from September 2017 found that the majority of Ontario residents would prefer privately run, not government-run, cannabis retailers.

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United Kingdom Legalizes Medical Cannabis

7/26/2018

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Medicinal cannabis products will be available by prescription in the United Kingdom this fall after the government relaxed drug laws surrounding the plant’s chemical compounds this week, The Independent reports. The move was prompted by several stories this summer about parents encountering trouble at the border after traveling overseas to acquire life-saving, cannabis-based epilepsy medicine for their children.

“Recent cases involving sick children made it clear to me that our position on cannabis-related medicinal products was not satisfactory. Following advice from two sets of independent advisors, I have taken the decision to reschedule cannabis-derived medicinal products – meaning they will be available on prescription. This will help patients with an exceptional clinical need.” — Home Secretary Sajid Javid, in the report

While medical cannabis products will be available via prescription, Home Secretary Javid said the move was “in no way a first step to the legalization of cannabis for recreational use.” In fact, raw cannabis will remain a class B drug in the UK carrying penalties of a potentially unlimited fine and up to five years in jail, with dealers facing 14 years.

Charlotte Caldwell, mother of 12-year-old Billy Caldwell who suffers from severe epilepsy, called the development “incredible.”

”For the first time in months I’m almost lost for words, other than ‘thank-you Sajid Javid.’” — Charlotte Caldwell, via The Independent

Now, the UK‘s Department of Health and Social Care (DHSC) and the Medicines and Healthcare Products Regulatory Authority (MHRA) face the task of providing a clear definition of what constitutes the newly legal cannabis-derived medicinal products. Once that definition is established, those products specifically will be rescheduled and made available via a doctor’s prescription.

Sir Mike Penning, MP and co-chairman of a bipartisan parliamentary group that pushes for cannabis reforms, warned against over-regulating the newly legal products.

“Any move to restrict medical cannabis in the UK to a very narrow range of derived products, each requiring full pharmaceutical trials, thereby blocking out the many products available overseas, will lead to great disappointment and be a missed opportunity.” — MP Mike Penning, co-chairman of parliamentary group Medical Cannabis Under Prescription, in the report

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Michigan Court of Appeals: “Wet Marijuana” Is Illegal

7/26/2018

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A Michigan Court of Appeals decision makes it impossible for medical cannabis cultivators to legally harvest their plants, according to MLive.com. A Michigan judge has ruled in People v. Vanessa Mansour that “wet marijuana,” the stage immediately following harvest but before the plant is fully cured and dried, is not covered by Michigan medical cannabis laws and is therefore illegal.

“Now, they’ve made it so you can’t even comply with the law. Obviously, it doesn’t go immediately from being a plant to being dried cannabis. There has to be a drying, or curing process. I think this court lacks some understanding.” — Matthew Abel, senior partner of Cannabis Counsel LLC, via MLive.com

The appeals court judge leaned heavily on a ruling made by that same court before medical cannabis laws had been passed, People v. Carruthers. But attorney Neil Rockind, a lawyer for Ms. Mansour, said that the obvious precedent is not People v. Carruthers but, rather, People v. Manuel, which is also a Michigan appellate court decision but one that was argued after the state’s medical cannabis program was established.

In People v. Manuel, the courts set a precedent that cannabis that is still drying does not count toward the allowed total weight because it is unusable in that state. That difference in weight would invalidate much of the case against Ms. Mansour.

“To say that the legislature makes it legal to possess growing plants and to possess a limited amount of finished product — but that in between, everybody is just illegal — that’s the interpretation that the Court of Appeals has hoisted on everybody. I don’t think the legal system has for the most part embraced the medical marijuana initiative. I think the legal system has been very slow, and in some ways defensive, of a view of marijuana as illegal.” — Neil Rockind, via MLive.com

Rockind said this decision will be appealed all the way to the Michigan Supreme Court.

“We fully intend to appeal, we’re not going to back down from a fight and we’re not going to back down from this fight. On behalf of my client and our clients, for patients, caregivers and all of us this fight has to be fought.” — Neil Rockind, in the report

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Cannabis Consumers Increasingly Prefer Edibles & Extracts Over Flower

7/26/2018

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Data from several cannabis market research and analysis firms continues to confirm the trend among consumers away from cannabis flower and towards vape cartridges, extracts and edibles, according to a USA Today report. Only recognizable brands with a diverse range of offerings are holding steady in this buyer’s market.

“Just growing flower is basically a knife fight to the bottom on price. The brands have the power. That’s what consumers expect in every industry, and this is no different.” — Ryan Smith, CEO of LeafLink, via USA Today

According to BDS Analytics and New Frontier Data, wholesale prices for flower in all markets continue to fall, some steeply. In the last 15 months in Oregon, the price of flower fell more than 41%. In Colorado, cannabis flower has gone from 67% of consumer purchases to 44% since legalization took effect, with the slack being picked up by a doubling in sales of concentrates. In California, it took just four months from the market’s launch for flower sales to drop 3%.

Meanwhile, cannabis analytics company Headset has studied the Washington marketplace meticulously since its launch — their data also reinforces the anti-flower trend.

“We track about nine categories of products right now and that’s everything from flower to pre-roll, concentrates, vapor pens, capsules, tinctures, topicals. It’s a wide variety of products. I think that what we’re seeing is certain categories like flower continuing to lose market share.” — Cy Scott, co-founder and CEO of Headset, via the Ganjapreneur.com Podcast

The price of flower has become so competitive that many large growers are bringing in traditional agricultural experts to help manage their electricity and fertilizer costs so they can eke profits from the smallest of margins. This trend is expected to continue as the industry matures and companies continue to innovate to meet consumer demands.

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Oklahoma Legalization Initiative Not Likely to Make Nov. Ballot

7/25/2018

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Oklahoma Secretary of State James Williamson said on Monday that the chances of voters seeing the state’s adult-use legalization question on November’s ballot are very slim, according to a Tulsa World report.

In fact, advocates have prepared two separate cannabis initiatives for the ballot. The first, State Question 796, would codify legal medical marijuana into the Oklahoma Constitution and the second, State Question 797, would ask voters to do the same for adult-use cannabis. Williamson warned, however, that state law allows opponents of the reforms to file an official protest with the Supreme Court, which would delay the initiatives’ approval and crush all hopes of them appearing on the November ballot.

“If a protest is filed, it is virtually impossible.” — James Williamson, Oklahoma Secretary of State, via Tulsa World

Oklahoma State Election Board spokesperson Bryan Dean said advocates have until August 8 to turn the signatures over to the capitol. That launches the lengthy process of hiring staff, counting the signatures, reviewing the ballot title, and receiving a certification from the Oklahoma Supreme Court. Even without a challenge, the process usually takes up to 60 days and, under state law, no election can be held fewer than 70 days after it was called by the governor.

Gov. Mary Fallin could conceivably call a special election to address the issue, but this is unlikely as she remains opposed to cannabis reforms and it would cost upwards of $1 million.

This means the 2020 general election is the most likely slot for SQ 976 and SQ 979, assuming they reach their signature goals.

On Sunday, Green The Vote — the group pushing both of the constitutional cannabis changes — announced that the adult-use initiative was just 6,000 signatures short of its goal. Oklahoma voters approved a statutory change last month establishing a medical cannabis regime but SQ 796 and SQ 979 both call for constitutional changes, which require more petition signatures to get put before voters.

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Vermont Attorney General Clarifies Cannabis Sales Not Legal

7/25/2018

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The office of the Attorney General of Vermont issued a clarification this week that, under Vermont law, the sale or commercial gifting of cannabis is still illegal.

“Act 86 does not legalize the sale of marijuana. Any transfer of marijuana for money, barter, or other legal consideration remains illegal under Vermont law.” — Office of the Attorney General of Vermont, via Vermont.gov

Vermont lawmakers voted in January to legalize cannabis possession and cultivation, but sales and distribution remain illegal. But like other decriminalized jurisdictions, Vermonters have embraced the gray market and some businesses are strategizing workarounds that are technically legal under Act 86, but the attorney general’s advisory could throw a serious wrench in the works for anyone attempting to make money from the transfer of cannabis.

The advisory goes on to specify that selling an item or service, such as a t-shirt or other merchandise, with an included “gift” of cannabis is illegal. Attempting to charge for the delivery of “gifted” cannabis is also an illegal loophole. Also stated in the advisory is that any type of gifting, even a non-commercial traditional gift, is definitively illegal to anyone under the age of 21.

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Lebanon Considers Legalizing Medical Cannabis to Defray Debt

7/25/2018

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Lebanon, which has been struggling under large national debts, is considering legalizing medical cannabis in the near term to help generate more national revenue, Bloomberg reports. Lebanon’s government was advised to consider a legal cannabis market, among other revenue-generating options, by consulting firm McKinsey & Co.

Lebanon’s trade minister Raed Khoury said enacting the changes advised by McKinsey & Co. would be necessary to get the international community to release $11 billion in grants and soft loans promised to Lebanon earlier this year. Khoury also said a medical cannabis market would be expected to add almost $1 billion in revenue per year.

Cannabis is widely cultivated, though illegally, in Lebanon’s Bekaa Valley. The current government runs eradication campaigns on a regular basis through that valley, though they do not do much to stifle production. The Bekaa Valley is controlled by Hezbollah, an organization which also holds a large number of seats in the Lebanese legislature as well.

Lebanon’s government is not yet a fully functioning democracy and political impasses have been a theme in the country’s recent past, as it attempts to develop a more lucrative economy. Khoury said, however, that Lebanon needs change to prevent major economic turmoil.

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