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Defining Hemp: Classifications, Policies & Markets, Part 2

By Darwin Millard
2 Comments

In Part 1 of this series we answered the question: What is “hemp”; and addressed some of the consequences of defining “hemp” as a thing. In Part 2, I will explore this topic in more detail and provide some commonsense definitions for several traditional hemp products based on a classification approach rather than separating “cannabis” from “hemp”.

Classifications, Specifications, and Test Methods – Establishing Market Protections for Hemp Products Through Standardization

Does making a distinction between “hemp” and “cannabis” make it easier to protect the interests of the seed and fiber markets?

On the face of it, this question seems obvious. Yes, it does.

Up to this point in history, the bifurcation of the cannabis plant into resin types and non-resin types has served to provide protections for the seed and fiber markets by making it easier for producers to operate, since the resins (the scary cannabinoids, namely d9-THC) were not involved. Today, however, the line in the sand, has been washed away, and “hemp” no longer only refers to non-resin producing varieties of the cannabis plant.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

As more and more hemp marketplaces come online with varying limits for d9-THC the need for standardization becomes even more pressing. Without standardization, each marketplace will have its own requirements, forcing businesses looking to sell their products in multiple jurisdictions to comply with each region’s mandates and adds a significant level of burden to their operations.

Providing an internationally harmonized definition for hemp is an important first step but allowing the d9-THC limit to vary from jurisdiction to jurisdiction has some unintended (or intended) consequences (#NewReeferMadness). These discrepancies between legal marketplaces will inevitably lead to the establishment of global trade regions; where, if your product cannot meet the definition of “hemp” in that region, then you could effectively be barred from participating in it.

A process which has already started. Harmonizing around 0.3% is great for the US, Canada, and European Union, but what about other stakeholders outside of these markets?

And, at what point does the conflict of hemp from one region with a d9-THC content of 0.3% and hemp from another region with a d9-THC content of 1% being sold into the same market become a problem?

Perhaps a better long-term solution for protecting the market interests of “hemp product” stakeholders would be to establish specifications, such as identity metrics, total cannabinoid content, especially d9-THC, and other quality attributes which have to be verified using test methods for a product to be classified as “hemp”. This system of standards (classifications, specifications, and test methods) would allow for more innovation and make it significantly easier for cannabis raw materials that meet these specifications to find a use rather than being sent to the landfill. Bolstering advancements and opening the door for more market acceptance of the cannabis plant, its parts, and products.

An Alternative Approach to Defining Hemp

Below are some proposed definitions related to common terminology used in the hemp marketplace based on the concept that there are no hemp plants, there are only cannabis plants that can be classified as hemp, and hemp products are simply cannabis products that meet certain specifications to allow them to be classified and represented as hemp.

  • Hemp, n—commercial name given to a cannabis plant, its parts, and products derived therefrom with a total d9-THC content no more than the maximum allowable limit for the item in question. (Maybe not the best definition, but it makes it clear that not only does the limit for d9-THC vary from jurisdiction to jurisdiction it varies from product type to product type as well.)
  • Hemp flower, n—commercial name for the inflorescence of a cannabis plant that can be classified as hemp.
  • Hemp seed, n—commercial name for the seeds of a cannabis plant which are intended to be used to grow another cannabis plant that can be classified as hemp.
  • Hempseed, n—commercial name for the seeds of a cannabis plant which are intended to be used as food or as an ingredient in food.
  • Hemp seed oil, n—commercial name for the oils expressed from the seeds of a cannabis plant.
  • Hemp seed cake, n—commercial name for the solid material byproduct generated during the expression of the oil from the seeds of a cannabis plant.
  • Hemp flour/meal/dietary-fiber, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content no more than 35% by weight.
  • Hemp protein powder, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content between 35% and 80% by weight.
  • Hemp protein isolate, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content above 80% by weight.
  • Hemp fiber, n—commercial name for the cellulosic-based natural fibers of a cannabis plant.
  • Hemp shives, n—commercial name for the hurd of a cannabis plant which have been processed to defined specifications.
  • Hempcrete, n—commercial name for a solid amalgamation of various aggregates and binders, typically comprised of the hurd (shives) of a cannabis plant and lime.

The d9-THC limits for each product were purposefully omitted because these specifications still need to be defined for each product type. Leaving the d9-THC limit up to each authority having jurisdiction, however, is not the answer. It is fine if you comply with a lower d9-THC limit and want to sell into a market with a higher d9-THC limit, but what do you do if you are above the limit for the market you want to sell into? For now, you lose out on potential revenue.

Hemp-derived CBD extract

I am not advocating that everyone starts selling “hemp” as “cannabis,” or vice versa, far from it. I am advocating for a more commonsense and inclusive approach to the marketplace though. One that would allow for the commercialization of materials that would normally be going to waste.

To me it is simply logical. There are no hemp plants, there are only cannabis plants that can be classified as hemp. There are no hemp products, there are only cannabis products that can be classified as hemp. In order for a cannabis product to be marketed, labeled, and sold as a hemp product, i.e. to be classified as a hemp, it would need to meet a set of specifications and be verified using a set of test methods first. But fundamentally the product would be a cannabis product being certified as “hemp”. And that is the shift in thinking that I am trying to get across.

Exclusionary Actions – Disenfranchising Stakeholders

The cannabis plant is an amazing plant and to fully capitalize on the potential of this crop we have to start allowing for the commercialization of cannabis raw materials that are not controlled by the UN Single Conventions, i.e. the seeds, stalks, roots, and leaves when not accompanied by the fruiting tops or the resin glands. Not to do so disenfranchises a significant number of stakeholders from participating in established legal avenues of trade for these goods. A concept proposed and endorsed the ASTM D37 in the published standard D8245-19: Guide for Disposal of Resin-Containing Cannabis Raw Materials and Downstream Products.

If you are stakeholder in the hemp marketplace, you may feel threatened by the idea of the market getting flooded with material, but how are the demands of the so called “green economy” going to be met without access to more supply? Organic hemp seed for food production is scarce but there is plenty of conventional hemp seed for the current demand, but what happens when hempmilk is positioned to displace soymilk in every major grocery store? To feed the growth of the human population and allow for a transition to a truly “green economy,” we need to ensure that the policies that we are putting in place are not excluding those looking to participate in the industry and disenfranchising stakeholders from burgeoning marketplaces, nor alienating a segment of the marketplace simply because their plant cannot be classified as “hemp”.

Until next time…

Live long and process.

Defining Hemp: Classifications, Policies & Markets, Part 1

By Darwin Millard
2 Comments

What is “hemp”?

The word “hemp” has many meanings. Historically the term has been used as the common name for the Cannabis sativa L. plant. Just like other plants, the cannabis plant has two names, a common name, hemp, and a scientific name, Cannabis sativa L. After the ratification of the UN Single Conventions on Narcotic Drugs and Psychotropic Substances, in 1961 and 1972 respectively, the term started to be used to distinguish between resin producing varieties of the cannabis plant and non-resin producing varieties of the cannabis plant. Nowadays the term is generally used to refer to cannabis plants with a delta-9-tetrahydrocannabinol (d9-THC), a controlled substance, content equal to or less than the maximum allowable limit defined by each marketplace.

Tetrahydrocannabinol (THC), just one of hundreds of cannabinoids found in cannabis.

In the United States and Canada, the limit is defined as 0.3% on a dry weight bases, and until November 2020, in the European Union, the limit was defined as 0.2%. After years of effort the “hemp” industry in Europe was successfully able to get the limit raised to 0.3% to be in line with the United States and Canada – creating the largest global trade region for hemp products. But there exist several marketplaces around the world where, either through the consequences of geographic location or more progressive regulations, the d9-THC content in the plant can be substantially higher than 0.3% and still considered “hemp” by the local authority.

To address these variances, ASTM International’s Technical Committee D37 on Cannabis has been working on a harmonized definition of hemp, or industrial hemp, depending on the authority having jurisdiction, through the efforts of its Subcommittee D37.07 on Industrial Hemp. The following is a proposed working definition:

hemp, n—a Cannabis sativa L. plant, or any part of that plant, in which the concentration of total delta-9 THC in the fruiting tops is equal to or less than the regulated maximum level as established by an authority having jurisdiction.

Discussion: The term “Industrial Hemp” is synonymous with “Hemp”.

Note: Total delta-9 THC is calculated as Δ⁹-tetrahydrocannabinol (delta-9 THC) + (0.877 x Δ⁹-tetrahydrocannabinolic acid).

This definition goes a long way to harmonize the various definitions of hemp from around the world, but it also defines “hemp” as a thing rather than as a classification for a type of cannabis plant or cannabis product. This is a concept rooted in the regulatory consequences of the UN Single Conventions, and one I strongly disagree with.

The definition also leaves the total d9-THC limit open-ended rather than establishing a specified limit. An issue I will address further in this series.

Can “hemp products” only come from “hemp plants”?

If you are an invested stakeholder in the traditional “hemp” marketplace, you would say, yes.

But are there such things as “hemp plants” or are there only cannabis plants that can be classified as “hemp”? (The definition for hemp clearly states that it is a cannabis plant…)

A field of hemp plants, (Cannabis sativa L.)

There is no distinction between the cannabinoids, seeds, and fibers derived from a cannabis plant that can be classified as “hemp” and those derived from a cannabis plant that cannot. The only difference is the word: “cannabis,” and the slew of negative connotations that come along with it. (Negative connotations that continue to be propagated subconsciously, or consciously, whenever someone says the “hemp plant” has 50,000+ uses, and counting, and will save the world because it’s so green and awesome, but not the “cannabis plant”, no that’s evil and bad, stay away! #NewReeferMadness)

The declaration that “hemp products” only come from “hemp plants” has some major implications. “Hemp seeds” can only come from “hemp plants”. “Hemp seed oils” can only come from “hemp seeds”. “Hemp fibers” can only come from “hemp plants”. Etc.

What does that really mean? What are the real-world impacts of this line of thinking?

Flat out it means that if you are growing a cannabis plant with a d9-THC content above the limit for that plant or its parts to be classified as “hemp”, then the entire crop is subjected to the same rules as d9-THC itself and considered a controlled substance. This means that literal tons of usable material with no resin content whatsoever are destroyed annually rather than being utilized in a commercial application simply because a part or parts of the plant they came from did not meet the d9-THC limit.

Some of the many products on the market today derived from hemp

It is well known that d9-THC content is concentrated in the glandular trichomes (resin glands) which are themselves concentrated to the fruiting tops of the plant. Once the leaves, seeds, stalks, stems, roots, etc. have been separated from the fruiting tops and/or the resin glands, then as long as these materials meet the authority having jurisdiction’s specifications for “hemp” there should be no reason why these materials could not be marketed and sold as “hemp”.

There are several reasons why a classification approach to “hemp plants” and “hemp products” makes more long-term sense than a bifurcation of the “cannabis” and “hemp” marketplaces, namely from a sustainability aspect, but also to aid in eliminating the frankly unwarranted stigma associated with the cannabis plant. #NewReeferMadness

That said, say you are a producer making shives from the stalks of cannabis plants that can be classified as “hemp” and then all of a sudden, the market opens up and tons of material from cannabis plants that cannot be classified as “hemp,” that was being sent to the landfill, become available for making shives. Would you be happy about this development? Or would you fight tooth and nail to prevent it from happening?

In this segment, we looked at the history of the term “hemp” and some of the consequences from drawing a line in the sand between “cannabis” and “hemp”. I dive deeper into this topic and provide some commonsense definitions for several traditional hemp products in Part 2 of Defining Hemp: Classifications, Policies & Markets.

First in the South – Virginia’s Legalization Focuses on Public Safety, Health and Social Justice

By Gregory S. Kaufman, Jessica R. Rodgers
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With the signing of the Cannabis Control Act (the Act) on April 21, 2021, Virginia became the first southern state to legalize adult use cannabis and just the fourth state to do so through the legislature. Legalizing adult use cannabis through the legislature, as opposed to through the ballot box, is not the typical route states have followed up to now. Eleven of the sixteen states and the District of Columbia have legalized adult use cannabis through the use of ballot measures. Virginia joins Vermont, Illinois, New York and New Mexico (which legalized after Virginia) as one of the few states that have gone the legislative route. Under Governor Northam’s administration, the path to legalization was swift, taking less than four months from introduction to passage.

Governor Northam added amendments to the already passed Senate Bill 1406 and the General Assembly voted to approve those amendments, with the Lieutenant Governor breaking the tie in the Senate’s vote. Upon signing, Governor Northam called the law a step towards “building a more equitable and just Virginia and reforming our criminal justice system to make it more fair.” This message and the opportunities to promote social equity through a legal cannabis industry have been consistent points of advocacy made by supporters as the bill advanced to becoming law.

Prior to the Governor’s amendments, the Act under consideration set July 1, 2024 as the date on which both legal possession and adult use sales would begin. The Governor decided to accelerate the date for legal possession to July 1 of this year, a decision believed to have been influenced by data showing that Black Virginians were more than three times as likely to be cited for possession, even after simple possession was decriminalized in the state a year prior. The regulated adult use market is still set to begin making sales on July 1, 2024; however, it remains possible that this date could be advanced through the legislature in the meantime. Nevertheless, Virginia is on track to becoming the first southern state with an operating regulated commercial cannabis market.

Creating an Administrative Structure for the Adult Use Program

Virginia became the first state in the South to legalize adult use cannabis

This sweeping fifty-page law creates the Cannabis Control Authority to regulate the cultivation, manufacture, wholesale and retail sale of cannabis and cannabis product. The Act further lays the groundwork for licensing market participants and regulating appropriate use of cannabis; defining local control; testing, labeling, packaging and advertising of cannabis and cannabis products; and taxation. The Act also contains changes to the criminal laws of the Commonwealth. Companion to the Act are new laws addressing the testing, labeling and packaging of smokable hemp products and manufacturing of edible cannabis products. Additionally, the Cannabis Equity Reinvestment Board was created to address the impact of economic divestment, violence and criminal justice responses to community and individual needs through scholarships and grants.

While persons 21 years or older may possess up to one ounce of cannabis and cultivate up to four plants for personal use per household beginning on July 1, 2021, there are a host of regulations to be written in order to regulate the adult use market. These regulations will be the devil in the details of how the regulated market will work. Regardless, the Cannabis Control Act does establish the framework for adult use cannabis that is unique to Virginia and designed to promote and encourage participation from people and communities disproportionately impacted by cannabis prohibition and enforcement.

The Cannabis Control Authority (CCA) will consist of a Board of Directors, the Cannabis Public Health Advisory Council, the Chief Executive Officer and employees. The Board will have five members appointed by the Governor and confirmed by the legislature, each with the possibility of serving two consecutive five-year terms. The Board is tasked with creating and enforcing regulations under which retail cannabis and cannabis products are possessed, sold, transported, distributed, and delivered. It is expected that the Board will begin discussing regulations next year and that applications for licenses for cannabis cultivation facilities, manufacturing facilities, cannabis testing facilities, wholesalers, and retail stores will begin to be accepted in 2023. Importantly, a Business Equity and Diversity Support Team, led by a Social Equity Liaison, and the Equity Reinvestment Board, led by the Director of Diversity, Equity and Inclusion, are to contribute to a plan to promote and encourage participation in the industry by people from disproportionately impacted communities.

Regulating Participation in the Market

The Act empowers the Board to establish a robust and diverse marketplace with many entry opportunities for market participants. Up to 450 cultivation licenses, 60 manufacturing licenses for the production of retail cannabis products, 25 wholesaler licenses and 400 licenses for retail stores can be granted. These numbers do not include the four permits granted to pharmaceutical processors (entities that cultivate and dispense medical cannabis) under the Commonwealth’s medical program.

Virginia Governor Ralph Northam
Image: Craig, Flickr

In addition to the sheer number of licenses that can be granted, the Act devises a unique approach to addressing concerns of a concentration of licenses in too few hands and a market dominated by large multi-state operators. At the same time, it sets up a mechanism to capitalize two cannabis equity funds intended to benefit persons, families and communities historically and disproportionately targeted and affected by drug enforcement through grants, scholarships and loans. Over-concentration and market dominance concerns are addressed by limiting a person to holding an equity interest in no more than one cultivation, manufacturing, wholesaler, retail or testing facility license. This eliminates the ability of companies to be vertically integrated from cultivation through retail sales operations. However, there are two exceptions to the impediment to vertical integration. First, the Board is authorized to develop regulations that permit small businesses to be vertically integrated and ensure that all licensees have an equal and meaningful opportunity to participate in the market. These regulations will be closely scrutinized by those looking to enter Virginia’s regulated market once they are proposed. Qualifying small businesses could benefit substantially from the economic advantages commensurate with being vertically integrated, assuming they have the access to the capital needed to achieve integration and operate successfully. The second exception allows permitted pharmaceutical processors and registered industrial hemp processors to hold multiple licenses if they pay $1 million to the Board (to be allocated to job training, the equity loan fund or equity reinvestment fund) and submit a diversity, equity and inclusion plan for approval and implementation. Consequently, Virginia is attempting to fund, in part, its ambitious social equity programs by monetizing the opportunity for these processors to participate vertically in the adult use market.

Those devilish details of how this market will function, and how onerous compliance obligations will be, will emanate from those yet to be proposed regulations covering many areas and subject matters including:

  • Outdoor cultivation by cultivation facilities;
  • Security requirements;
  • Sanitary standards;
  • A testing program;
  • An application process;
  • Packaging and labeling requirements;
  • Maximum THC level for retail products (not to exceed 5 mg per serving or 50 mg per package for edible products);
  • Record retention requirements;
  • Criteria for evaluating social equity license applications based on certain ownership standards;
  • Licensing preferences for qualified social equity applicants;
  • Low interest loan program standards;
  • Personal cultivation guidelines; and
  • Outdoor advertising restrictions.

Needless to say, the CCA Board has a lot work ahead in order to issue reasonable regulations that will carry out the dictates in the Act and encourage the development of a well-functioning marketplace delivering meaningful social equity opportunities.

Much work needs to be done before July 1, 2024 to prepare for its debutThe application process for the five categories of licenses will be developed by the Board, along with application fee and annual license fee amounts. It is not clear how substantial these fees will be and what effect they will have on the ability of less-well-capitalized companies and individuals to compete in the market. The Act dictates that licenses are deemed nontransferable from person to person or location to location. However, it is not entirely clear that changes in ownership will be prohibited. The Act contemplates that changes in ownership will be permitted, at least as to retail store licensees, through a reapplication process. Perhaps the forthcoming regulations will add clarity to the transferability of licenses and address the use of management services agreements as a potential workaround to the limitations in license ownership.

Certain requirements particular to certain license-types are worthy of highlighting. For example, there are two classes of cultivation licenses. Class A cultivation licenses authorize cultivation of a certain number of plants within a certain number of square feet to be determined by the Board. Interestingly, Class B licenses are for cultivation of low total THC (no more than 1%) cannabis. Several requirements specific to retail stores are noteworthy. Stores cannot exceed 1,500 square feet, or make sales through drive-through windows, internet-based sales platforms or delivery services. Prohibitive local ordinances are not allowed; however, localities can petition for a referendum on the question of whether retail stores should be prohibited in their locality. Retail stores are allowed to sell immature plants and seek to support the home growers, an allowance that is fairly unique among the existing legal adult-use states.

Taxing Cannabis Sales

Given the perception that regulated cannabis markets add to state coffers, it is little surprise that Virginia’s retail market will be subject to significant taxes. The taxing system is straightforward and not complicated by a taxing regime related to product weight or THC content, for example. There is a 21% tax on retail sales by stores, in addition to the current sales tax rates. In addition, localities may, by ordinance, impose a 3% tax on retail sales. These taxes could result in a retail tax of approximately 30%.

Changes to Criminal Laws

Changes to the criminality of cannabis will have long lasting effects for many Virginians. These changes include:

  • Fines of no more than $25 and participation in substance abuse or education programs for illegal purchases by juveniles or persons 18 years or older;
  • Prohibition of warrantless searches based solely on the odor of cannabis;
  • Automatic expungement of records for certain former cannabis offenses;
  • Prohibition of “gifting” cannabis in exchange for nominal purchases of some other product;
  • Prohibition of consuming cannabis or cannabis products in public; and
  • Prohibition of consumption by drivers or passengers in a motor vehicle being driven, with consumption being presumed if cannabis in the passenger compartment is not in the original sealed manufacturer’s container.

These changes, and others, represent a balancing of public safety with lessons learned from the effects of the war on drugs.

Potpourri

The Act contains myriad other noteworthy provisions. For example, the Board must develop, implement and maintain a seed-to-sale tracking system for the industry. Plants being grown at home must be tagged with the grower’s name and driver’s license or state ID number. Licenses may be stripped from businesses that do not remain neutral while workers attempt to unionize. However, this provision will not become effective unless approved again by the legislature next year. Banks and credit unions are protected under state law for providing financial services to licensed businesses or for investing any income derived from the providing of such services. This provision is intended to address the lack of access to banking for cannabis businesses due to the federal illegality of cannabis by removing any perceived state law barriers for banks and credit unions to do business with licensed cannabis companies.

The adult use cannabis industry is coming to Virginia. Much work needs to be done before July 1, 2024 to prepare for its debut. However, the criminal justice reforms and commitment to repairing harms related to past prohibition of cannabis are soon to be a present-day reality. Virginia is the first Southern state to take the path towards legal adult use cannabis. It is unlikely to be the last.

Hardware Platforms in Cannabis: A Q&A with Mike McDonald, President and CEO of Ammonite

By Aaron Green
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More and more we are seeing the development of proprietary hardware platforms in cannabis. With proprietary technology in hand, manufacturers often lean on MSOs, LPs and other brand partners to grow their business through existing sales channels.

We spoke with Mike McDonald, President and CEO at Ammonite, to learn more about the history of the Dablicator™ platform and Ammonite’s North American brand partner strategy. Mike formed Ammonite as a spin-off company from Jetty Extracts after getting to know the founders in a real estate transaction. Prior to Ammonite, Mike was an operator in the manufacturing and product development space, having helped to launch the Giant bicycle brand as well as growing and eventually selling the Atlas Snowshoe Company to K2 Sports.

Aaron: How did you get involved in cannabis?

Mike: Well, like a lot of folks in the industry, my background is pretty eclectic. I come primarily from an operator’s perspective – I’ve been in manufacturing, product development and company growth for my whole career. I lived in Taiwan for several years and helped to launch the Giant bicycle brand worldwide. I was also involved with a ski business that was started at Stanford as a thesis project called Atlas Snowshoe Company. Fast-forward, we built it into the largest snowshoe brand and activity in the US and later sold it to K2 Sports. So, I’ve always been involved in the growth of product-related businesses.

Mike McDonald, President and CEO at Ammonite

I’ve also done some real estate development as well; I actually sold our building to the Jetty guys, which is how we met. In that process, I got involved with their company, helped Jetty reorganize its business model, raise some money, and then just got addicted to the whole industry and really found it fascinating. I liked the team at Jetty and couldn’t resist jumping in, and now I’ve been full-time in the business for over three years.

Aaron: How did you get involved in Ammonite?

Mike: Ammonite is actually a spin out company from Jetty Extracts, which is one of the largest brands in California. Our main Ammonite product is called the Dablicator™ Oil Applicator, which was originally invented at Jetty as a medical device for cancer patients. We saw a big demand for it as a private label partnership product, so we decided to spin out a separate hardware company and really focus on developing unique IP and CBD and cannabis related hardware.

Aaron: What trends are you following in the industry?

Mike: Certainly the MSOs of the world are really expanding and the top three to five are making a mark with growth and more sophistication in the market. I think the social equity movement is really a big component that we’re all excited about in the industry. You’re seeing the larger players really put their money where their mouth is around that. We’ve always been a big part of that in California.

Specifically, regarding trends in the cannabis space, Colorado and California are probably the two most mature markets. We generally say what’s happening in California and Colorado eventually make their way out to the rest of the world. Vaping was invented in California and Colorado, and now it’s a huge part of the business where before, four or five years ago, the market was mostly flower-centric.

There’s a trend away from inhalables, with more awareness around lung-related illnesses and of course COVID, so we’re seeing a big growth in edibles, drinks and so forth. Interestingly enough, although it’s an inhalable, infused pre-rolls are a big growth sector as well. Jetty is actually launching an infused pre-roll program in February.

Folks are looking for ways to get their medicine without smoking – and this has definitely led to a growth in the oil application business. Oil application has traditionally been delivered via a syringe. Dablicator™ oil applicator is essentially an improved, more convenient syringe. On the medical side, patients have been taking oil sublingually, putting it in food and drink and so forth for years because a lot of them can’t smoke. As that trend transfers over to the adult use market, oil application is becoming really big. You can take it sublingually; you can put it in your food or beverage. On the recreational side, you can add it to your loose flower or joints, or of course, dab it directly onto your rig via the heat resistant tip.

Further, you’re probably familiar with a lot of these portable dab rigs that are taking off, like the G Pen Roam and the Puffco Peak and a variety of others. So now you can dab on the go with your standard wax and shatter in a jar. It’s just not the most convenient way if you’re up on a hike or on a mountain bike ride. So now, with a portable dab rig and something like the Dablicator™ oil applicator, you can have a really convenient mess-free way to enjoy cannabis. The big growth in concentrates and areas that aren’t necessarily inhalables is where our product hardware really fits in.

Aaron: How did you come up with the idea for the Dablicator?

Mike: The Jetty team had a friend that had brain cancer. He was doing a lot of chemotherapy and was having trouble eating and keeping weight on and he couldn’t smoke. So, the guys at Jetty began to bring him cannabis oil, which he was able to use ingesting it from a spoon initially and it really helped him with his pain, his anxiety and his appetite. In that process, we realized that there wasn’t really a great way to deliver oil. Syringes were there, but they were kind of sketchy and they weren’t convenient.

So, the Jetty team developed a better mousetrap. Several iterations later, this Dablicator™ product was ready for patients. In fact, it became a big part of the Jetty Shelter Project, a non-profit where the team delivers cannabis to cancer patients, and it was a very much sought-after product delivery device in that world. So, it was developed inside of a need on the medical side and it’s really sort of grown inside the expansion on the adult-use side.

Aaron: Can you explain how the Dablicator™ oil applicator works from a perspective of form and function?

Mike: Pre-Dablicator™ you would use a syringe type product – for direct oil application, sublingual application, or as an add on to your flower. The difference between Dablicator™ oil applicator and a traditional syringe is that Dablicator™ is a twist and plunge product. Imagine a pen filled with oil, but instead of inhaling it, you’re able to dispense it through a tip that is heat resistant, which means you can apply directly to your dab rig nail. You’re able to put it in your pocket without fear of cannabis oil leakage. It’s discreet, precise, compact and portable.

Aaron: How does the user dose using Dablicator™ oil applicator?

Mike: Basically, there’s measurements on the plunger of 55 milligrams apiece – one click is 55 milligrams, and you can dispense as many clicks as you like. What’s cool about the product itself is if you’ve clicked too many times accidentally, you can back it off and the excess oil won’t dispense. You can go to dablicator.com and see demo videos as well.

Aaron: Dablicator™ oil applicator started as a Jetty Extracts spin-off. I see you are now white labeling for other oil brands. How do you go about selecting your partners?

Mike: We call it our brand partner program. It’s not too dissimilar to what other hardware manufacturers, like PAX and GPen, are doing. We’ve got a patented and innovative device where our brand partners, MSOs and leading brands throughout the US and Canada, can take their existing vape and tincture oils and offer them in Dablicator™ oil applicator hardware.

Our focus is signing up major, well respected brands and MSOs on to the “platform,” meaning they are able to immediately offer between six and ten new SKUs to their consumers. They take their existing oils, put them into a custom branded Dablicator™ hardware unit and add their custom branded packaging. It’s a full turnkey solution. For example, one of our partners, 710 Labs, is developing their RSO and were shopping for a delivery method specifically geared towards medical patients. Within eight weeks, we had a custom program for them and delivered hardware, and we assisted on the packaging front as well.

Our partners have to be reputable folks that are interested in developing or delivering oil in a unique and innovative way. Frankly, our early partners are those that see where the growth is. 710 Labs is on the platform, as well as Surterra in Florida, Ancient Roots in Ohio, and we’ve got multiple conversations going to some of the other MOSs and the LPs in Canada.

Aaron: Are the brand partners loading the oil applicator themselves?

Mike: We customize the product for them and then ship them unassembled and empty. In their lab, they use the same machinery and equipment they use to fill their vape cartridges. They then fill their Dablicator™, assemble it, package it and ship it out just like any other product that they’re processing and manufacturing.

Aaron: What kind of oils are suitable for Dablicator™?

Mike: Pretty much any oil that’s going into a vape cart is suitable and then some. Some of our customers, including Jetty, started out with a THC distillate. Live resin is becoming a big product category in California as well as solventless oils. Dablicator™ oil applicator can accommodate everything from distillate to live resin to solventless to RSO and even full spectrum CBD. If it can flow, if it doesn’t crystallize up like shatter and sugars and diamonds, you can put it into Dablicator™, even the thickest of oils. It’s designed to contain any kind of liquids that are flammable.

Aaron: What geographies are you currently in?

Mike: We’re in multiple states throughout the US and actually just signed up with an LP in Canada. We only launched the program in August of 2020, and today we’ve got partners California, Colorado, Ohio, Arizona, Missouri, Florida, soon to be Michigan, Illinois, and throughout Canada.

Aaron: Any plans for international expansion beyond North America?

Mike: We’re getting inquiries on a regular basis from all over the place, including internationally. We’re in conversations with some folks down in Brazil. Spain is actually a big cannabis market and we’re having some conversations with some folks there. The inquiries are coming in faster than we can process the relationships, but right now our major focus is on North America.

Aaron: What are your goals with Ammonite?

Mike: We are developing a category, right? So today, oil dispensing isn’t top of mind. Today, if you want oil, you go into a dispensary and say, “Hey, give me those syringes.” My goal is that a year from now, you can walk into Harborside in Oakland and you see a wall of different branded Dablicator™ oil applicators. The goal is to really turn the oil dispensing business into a category, and then position Dablicator™ oil applicator as the best and leading product in that category.

Aaron: What are you personally interested in learning more about?

Mike: Well, I’ve got two teenagers – two daughters, as a matter of fact, a freshman and a senior – and they’re being homeschooled right now. So that’s been quite an interesting development!

I think on the cannabis side, it’s just fascinating what it is as a business model. It’s the most recent multi-billion-dollar opportunity in consumer products. You only get a chance to participate in something like that maybe once in a lifetime. I’m really looking forward to seeing it become more adopted into the mainstream and it’s already becoming that way from a consumer perspective. I am watching the cannabis market become legal from a federal perspective, hoping that the social equity component of the industry really stays with it.

I’ve been in a lot of businesses over the years; I feel like one of the gray hairs in this business that is actually an operator versus someone who came over from the financial side. I am continuing to learn, grow and work with great people and this has been a really amazing experience for me.

Aaron: Okay, great. Mike, that’s the end of the interview. Thank you for your time today!

An In-Depth Breakdown of Prop 207 in Arizona

By Laura Bianchi, Justin Brandt
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To say 2020 was a historic year is an understatement.

Arizona landed in a solid eighth place among the top ten most successful cannabis states thanks to its expansive medical cannabis program. To close out the year, voters approved Proposition 207, also known as the Smart and Safe Arizona Act (SSAA), making Arizona one of 15 states, plus Washington D.C., to legalize the adult use of cannabis, which is expected to rocket the state’s overall cannabis sales to new heights.

It’s essential to this conversation that we clarify the two sides of this rapidly growing industry. Medical cannabis is a form of treatment, the adult use and consumption of cannabis is a choice. During the pandemic, in many medical cannabis states, the medical cannabis industry was deemed an essential service and allowed to continue providing valuable medicine to patients and caregivers. As medical cannabis programs continue to provide safer therapeutic options which are complementary to or serve as an alternative to many traditional treatments and narcotics, especially opioids, patients can be confident the need for medical programs will continue. Arizona’s adult use cannabis program imposes greater limitations on quantity and potency, while also requiring higher standards for packaging. We saw a trend during the pandemic as again, many states prioritized and allowed their medical programs to continue, while limiting adult use facilities, in the same manner as other non-essential businesses.

It’s also worth noting that we have seen many inevitable changes in patient behaviors during the pandemic, including an increased need for medical cannabis. There was a patient demand for convenience, safety and no-contact services, increased online ordering, scheduling and curbside pick-up or delivery. Many of these services were already on the rise in popularity throughout the various legal states. While Arizona’s recreational program prohibits delivery until at least 2023, retail adult use consumers will expect some of these services to extend to the new market. As life after the COVID-19 pandemic continues on and the need for some of these safer more convenient options also continues, we hope to see them more permanently implemented from a legal and regulatory perspective. For now, here are the highlights we’ll see come into play in the first few months of 2021 as Arizona adopts its new adult use cannabis program.

Smart and Safe Arizona Act (Prop 207):

  • Legalizes the sale, possession (one ounce) and consumption of adult use cannabis for adults at least 21 years old.
  • Adds a 16 percent excise tax on adult use cannabis sales, in addition to the state’s 5.6 percent, totaling a 21.6 percent tax.
  • Allocates an estimated $300 million in Arizona revenue to be divided between community college districts, municipal police, sheriff and fire departments, fire districts, highway funds, public health programs, infrastructure, and a new Justice Reinvestment Fund.
  • Allocates more than $30 million annually for addiction prevention, substance treatment, teen suicide prevention, mental health programs, and justice reinvestment projects.
  • Provides opportunities for expungement of certain lesser cannabis-related crimes such as possession, consumption, cultivation or transportation.

But of course, state law is just one part of the equation. Adult use cannabis facilities must be licensed separately from state to local levels, including counties to cities to local municipalities, all of which may also adopt rules and requirements through zoning and land use ordinances. Swift and certain timelines established by the Smart & Safe Act dictate the speedy launch of this new program, first utilizing the existing medical cannabis infrastructure.

Many Arizona consumers are under the impression that they’ll be able to walk into a dispensary on January 1, 2021 and buy cannabis. But that is not the case. They’ll have to wait until the Arizona Department of Health Services (AZDHS) completes the early applicant licensing process, which begins in January 2021. Currently, local and multistate operators are waiting for AZDHS to complete the rules and regulations for the adult use cannabis program. Here are two of the most significant steps to be navigated in the upcoming weeks:

Smart and Safe Arizona Act (Prop 207) – Step 1: The Rulemaking Process

AZDHS has been tasked with developing the rulemaking process for the Smart & Safe Act. The first draft of the adult use cannabis program rules has already been released, primarily consisting of the application requirements for the early applicant process.  AZDHS collected its first round of public comments for consideration on Thursday, December 17, 2020.  The exact details and parameters of the adult use cannabis program will not be finalized or known for certain until AZDHS completes the rulemaking process. We anticipate the next draft of adult use cannabis rules to be released sometime in early January.

Smart and Safe Arizona Act (Prop 207) – Step 2: The Application Process

AZDHS will begin accepting early applicants under the Smart & Safe Act on January 19, 2021, closing the process on March 9, 2021. Current medical cannabis license holders who apply for and acquire an adult use license in the early applicant process will be authorized to a dual-licensed dispensary (both medical and adult use license), as well as one offsite manufacturing facility (which may later be amended to include both medical and adult use manufacturing license), and offsite cultivation.

Early adult use license applicants are reserved for those that currently hold in good standing at least one Medical Marijuana Registration Certificate (“Medical Marijuana License”) and applicants applying to counties with no current operating dispensaries. Any county with a single operating dispensary (a medical cannabis dispensary) will be allocated an adult use license (dual license) as long as the medical license holder is in good standing for the application.  All adult use licenses allocated to those counties without a current operating dispensary must keep that dispensary within that county.

AZDHS will have 60 days to process each application. Adult use licenses for counties without a current operating dispensary will be allocated through a random selection process, if more than two applications are received for that county. Additionally, upon the conclusion of the early applicant process, any adult use license that has not yet been awarded through that process, will be available to the general public and allocated through a random selection process.

This brings us to later phases of implementation of the Smart & Safe Act: within approximately six months of the adoption of the initial recreational program rules, AZDHS must develop and adopt the rules and regulations for the Social Equity Ownership Program (SEOP). The primary goal of the SEOP is to allocate 26 adult use licenses to “communities disproportionately impacted by the enforcement of previous cannabis laws.” In other words, communities disproportionately and negatively impacted by cannabis criminalization. Smart & Safe is light on the exact manner and process at this point, so Arizona voters and cannabis companies will look to AZDHS for the development and implementation of this important part of the adult use program. Stay tuned.

How GW Pharma Won CBD

By Cathleen Rocco
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As of this writing, the United States Food and Drug Administration (FDA) has approved GW Pharma’s CBD drug Epidiolex for treating profound refractory pediatric epilepsy syndromes (Dravet syndrome and Lennox Gastaut syndrome) as well as for treating seizures associated with tuberous sclerosis complex (TSC) in patients one year of age or older. The product is a very simple, orally-administered formulation comprised of 100mg/ml cannabidiol (CBD), dehydrated alcohol, sesame seed oil, strawberry flavor and sucralose – basically, an alcohol-based solution with sesame seed oil to help solubilize the CBD oil, flavoring and sweetener.

GW logo-2On April 6th, 2020 GW Pharma performed a regulatory miracle when they succeeded in convincing the Drug Enforcement Administration (DEA) to deschedule Epidiolex (i.e., remove it from the Schedule 1 and Schedule 5 lists of substances that the agency regulates due to concerns regarding safety, potential for abuse or both) for all indications – including indications for which it has not yet been approved by the FDA.1 The benefit to GW of having their product descheduled is incalculable. This status change removed potential barriers to insurance reimbursement and made the need to set up and administer an expensive REMS2 drug safety program less likely. In part because of this regulatory coup d’état, the drug recently posted yearly earnings of nearly $300 million.

It is important to note that the DEA descheduled the Epidiolex formulation and not cannabis-derived CBD itself. Thus, GW Pharma is now in the enviable position of being the only company that can legally sell cannabis-derived CBD. More importantly, because the DEA descheduled the formulation and not the active ingredient, other companies who wish to market cannabis-derived CBD pharmaceutical formulations will have to repeat whatever it is that GW did to get Epidiolex descheduled.3 The DEA effectively gave the company a huge head start with respect to competitors who are developing other cannabis-derived CBD formulations that would compete with Epidiolex. That advantage will remain in place unless and until cannabis-derived CBD itself is descheduled or cannabis is legalized at the federal level.

GW Pharma’s CBD drug Epidiolex, which is FDA-approved to treat profound refractory pediatric epilepsy syndromes

GW Pharma’s attorneys demonstrated considerable virtuosity in devising this approach. However, there is another aspect of the GW Pharma story – one that could have profound implications for the exploding CBD consumer packaged goods (CPG) industry. The Federal Food, Drug, and Cosmetics Act4 (FFDCA) prohibits the introduction into interstate commerce of any food to which has been added an approved drug or a drug for which substantial clinical investigations have been instituted and made public.5 Because CBD was and is still the subject of clinical trials run by GW Pharma and others, even hemp-derived CBD is currently illegal to use as a food additive or dietary supplement under the FDCA

The FDA has recently re-started the public commentary stage of a long process that will hopefully result in the creation of a regulatory pathway for CBD to be used as a food additive – something that would seemingly be a straightforward matter given the copious amounts of safety data being generated from all of GW Pharma’s clinical trials. However, as long as the FDA continues to drag its feet in providing a regulatory pathway for CBD CPG products, CBD, regardless of its source, will remain illegal to use as a food additive or supplement under either the CSA or the FFDCA despite the existence of safety data obtained through the Epidiolex clinical trials. If, as many people in the industry anticipate, the agency decides to begin enforcement action, this could have a hugely negative impact on the industry.

In addition to the potentially disastrous effect that federal law could have on an important new industry, the federal regulatory scheme introduces unnecessary regulatory complexity and cost by imposing two different regulatory schemes depending on the source of the CBD. CBD derived from hemp is chemically identical to CBD derived from cannabis. Despite that identity, the 2018 Farm Bill nonsensically exempts only hemp-derived CBD from the Controlled Substances Act. If a regulatory pathway is created for hemp-derived CBD, but the DEA insists on maintaining cannabis-derived CBD as a schedule 1 substance, then the same molecule will be subject to two different regulatory schemes. This scenario would require tracking and certifying CBD sources and thereby impose regulatory and economic burdens that are entirely unnecessary from a public health point of view.

FDAlogoAn alternative, economically disastrous scenario: given the pharmaceutical industry’s formidable lobbying power, it is entirely possible that the FDA could decide to limit the use of CBD exclusively in prescription drug formulations. This could kill the entire US hemp CBD CPG industry, currently estimated to reach $22 billion by 2022.6

Overall, the current state of affairs is unfair, expensive, uncertain and entirely unworkable over the long term. The CSA must be amended, ideally to deschedule both hemp and cannabis entirely, but at least in the short term, to deschedule CBD and preferably all non-THC cannabinoids regardless of their source. Further, the FDA must provide a regulatory pathway to allow the use of low doses of cannabinoids shown to be safe, either by existing clinical trial data or future testing pursuant to the NDIN submission process.

A 2019 Gallup poll found that 14% of Americans – 1 in 7 – use CBD products.7 The demand is there, the industry is thriving, and adequate safety data exists to justify a regulatory system that allows low-dose over the counter CBD products provided those products are produced using Current Good Manufacturing Practices (CGMPs) for food and dietary supplement manufacturing prescribed by the FDA and that such products undergo regular testing that demonstrates they are safe, unadulterated and accurately labeled. It is time for the industry to collectively fund a New Dietary Ingredient Notification (NDIN) submission that would provide safety data sufficiently compelling to force the FDA to either recognize CBD and other non-THC cannabinoids as being GRAS substances regardless of their source, or in the alternative create a regulatory path for CPG products containing low-doses of CBD and other non-THC cannabinoids.

Editor’s Note: The opinions expressed in this publication are those of its author. They do not purport to reflect the opinions or views of the Cannabis Industry Journal, its editorial staff or its employees.


References

  1. Clincialtrials.gov lists 256 different clinical trials in which Epidiolex has been, is being or will be tested for a wide variety of other indications, including but not limited to opioid use disorder, several types of prostate cancer, alcohol use disorder, musculoskeletal pain, and a host of others.
  2. REMS – risk evaluation and mitigation strategy – are drug safety programs that the FDA requires in cases where mediations pose serious safety concerns with respect to potential abuse and other adverse effects.
  3. Exactly what they did isn’t clear, and won’t be for a long while given the snail’s pace at which FOIA requests are filled.
  4. Title 21 United States Code Chapter 9
  5. Title 21 United States Cod Chapter 9, Sections 331(ll), 342(a)(1) and Section 342(d)(f)(1)
  6. “Exclusive: New Report Predicts CBD Market Will Hit $22 Billion by 2022” Rolling Stone Magazine, September 11, 2018, citing cannabis industry analysis from the Brightfield Group.
  7. Gallup poll on American CBD product usage

2020 CQC Episode 4, Licensing Applications

By Cannabis Industry Journal Staff
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2020 Cannabis Quality Virtual Conference

Licensing Applications (Episode 4)

Property and People and Paperwork, Oh My! License Application Prep For Success

  • Victoria Trusty and Greg Huffaker, Canna Advisors

Attendees will learn from industry veterans who have helped clients win licenses across the US. 1. Get tips on property selection details and timing 2. Understand social equity opportunities and requirements 3. How and when to build out your team 4. Gain practical insights that only come with working on applications in multiple states.

Show Me Medical Cannabis! Case studies in Missouri clients’ wins and woes

  • Victoria Trusty and Greg Huffaker, Canna Advisors

Attendees will learn how to avoid common pitfalls from a case study analysis of the Missouri application process. What helped applicants win? What caused applicants to lose points? How do attendees apply these learnings to their own application? 1. Learn the basics of the application process 2. How to plan for success 3. Learn how to avoid property woes, with real world examples 4. Gain insights on building your team to maximize points 5. Learn about key phases where funding is critical and allocating funds for the most impact 6. Understand how project and time management can be your “secret sauce.”

Click here to watch the recording

A Joint Problem: How Cannabis Testing Policies Affect Applicants’ Attraction Toward an Organization

By Prachi
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Employees with substance abuse issues could cause problems for their employers. Recent legalization of cannabis has prompted organization to re-evaluate their drug testing policies in anticipation of increased usage among employees and potential hires (Rotermann, 2020). Cannabis use has increased from 14.9% to 16.8% post-legalization in Canada. Policies that enable routine cannabis-testing of employees, though beneficial in some cases, might negatively affect the perceptions of individuals toward the organizations that hold these policies. Specifically, job applicants may perceive the administration of such policies as unfair. I investigated the influence of cannabis testing policy and its perceived fairness on job applicants’ perception of organizational attractiveness and their intention to apply to a job vacancy.

A recruitment notice was presented to potential participants, which included a link to the survey. After reading and signing the consent form, participants were randomly assigned one of the three drug testing conditions (severe, moderate, none). Severe drug testing policies include testing pre-employment, randomly during the employment period, and in response to suspicious behavior. Moderate drug testing policies include administering drug testing pre-employment and in cases of suspicion. None is the control (i.e., no testing policy in place). The corresponding vignette was presented, followed by the survey questionnaire (measures on organizational attractiveness, intention to apply, perceived fairness, and perceived stigma), demographic questions, and questions on cannabis usage.

Cannabis user’s perceived fairness of cannabis testing was higher within organizations with no compared to severe testing situations (Figure 1). However, for individuals who do not ingest cannabis, the perceived fairness was higher for organizations with severe compared to no cannabis testing policy. This suggests that cannabis users deem cannabis testing as unfair regardless of the type of policy. This supports previous research findings on recreational use of cannabis and job seekers’ perception of drug testing (Paronto et al., 2002). Based on Gilliland’s (1993) model of organizational justice and perceived fairness, there are 10 procedural rules categorized into three categories: formal characteristics of selection system, explanations offered during the selection process, and interpersonal treatments that help form the applicants’ perceived fairness. In the current study, the no-cannabis testing job advertisement was seen as valid (one of Gilliland’s procedural rules is selection information) and honest (one of Gilliland’s procedural rules is honesty) by the cannabis users; however, moderate and severe testing was not seen in the same light, which might explain why we see decreased perceived fairness for cannabis testing. Those two procedural rules violate reasonableness leading to decreased perception of organizational fairness among cannabis users for cannabis testing.

The current study also supported past research by confirming that the individuals who ingest cannabis demonstrated increased levels of organizational attractiveness and intention to apply to organizations that had none compared to severe cannabis testing policies. If the organization is testing for cannabis use pre-employment or randomly, in addition to post-accident/suspicious behavior (i.e., severe policy), cannabis users’ level of organization attractiveness and intention to apply is much lower. This could be due to the fact that cannabis has been legalized in Canada and 11 states in the US  (Leafly, 2020). Individuals might feel that severe testing is an invasion of their privacy given that they are not doing anything illegal. Furthermore, job applicants perceived drug-testing as harassment toward individuals and claimed it represents a repressive work environment. Given that, this feeling could prevent an applicant from applying or considering the available job.

Implications: This study has important implications for employers and organizations in general. Even though it is important to have cannabis testing policies in place, it is equally important to consider the impact of cannabis testing on the potential talent pool. Such perceptions of drug testing may lead talented applicants to self-select out of the job pool. This would lead to a decreased number of applicants for a job available to the employer. Therefore, knowing the attitudes and intentions of individuals who ingest cannabis toward moderate and severe testing policies will provide employers with solid research-based evidence from which to design programs and policies surrounding cannabis testing.

The Hopes of Illinois Social Equity Applicants

By Taneeshia Thomas
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It is almost impossible to turn on the tv and not find a show or news conference or even live footage of an ongoing protest over “Black Lives Matter” or “Economic Equality.” The same situation exists with social media platforms, radio broadcast, etc. All sharing the common theme of social equity. While we all seek a solution, the state of Illinois is doing their part by awarding the coveted adult use cannabis business licenses for craft growing, infusion, transportation and dispensaries to social equity applicants by using a scoring system that favors the social equity applicant. We believe in this vision at TGC Group and our dream is to pay it forward.

Taneeshia Thomas and her husband, Christopher Lacy, who did 3.5 years in prison for growing cannabis in 2009.

We see the world, especially for minorities living in poverty, quite differently because of where we come from. “Black Lives Matter” is a movement to save the lives of all people and have human life viewed equally no matter the race of an individual. Economic equality is a totally different fight. Our communities that are impoverished need cash infusions. There needs to be financial infrastructure that recirculates the dollars from the poor communities and that comes from having business owners in the affected community to put their profits back into their community. There needs to be a system of lending that is not based on credit scores and criminal background checks because most people at the bottom will never qualify. An example would be my husband, Christopher Lacy: he went to prison for 3.5 years for growing cannabis back in 2009. He is not a violent man; he never even had a fight in prison. He spent much of his time in prison teaching inmates how to read, write and most importantly, he tried to teach them economics. He is educated about cannabis because he has been intimately involved with this plant and has been growing it for just about 20 years. Yet when he tried to apply for jobs in Illinois for growing cannabis, his invisible barrier starts with the resume. Just think about it, my husband, knows more about cannabis than most people in the industry today and could manage a facility with ease. No one could see his worth because of his background and work experience? This is the same situation with so many others in our poor communities. We know for a fact that there is hidden talent in the impoverished communities and prison system, and we intend to find it and empower these individuals to rebuild what was destroyed by the war on drugs. I speak for all the ghettos when I say this: give us access to the capital and we will get the rest done on our own. Conventional banks have their hands tied with this approach because they are regulated, but private funds have more flexibility. The excess capital needed to rebuild will not come from jobs, it only comes from ownership. Luckily, J.B. Pritzker and Toi Hutchinson are aware of this and hence created the social equity fund to help the social equity applicants fund their projects if and when they are awarded a license. We must find a way to give to the bottom so that the dollars can trickle up. Trickledown economics is kind of like that movie “Platform” on Netflix. There are never enough resources to get to the bottom because the people sending the resources down have no idea how to get them to the bottom floors of society. Trickle up economics can start at the very bottom rungs of society and still will reach to this highest level of the economic system because its built in such a way that it will inevitably get there.

State Sen. Toi Hutchinson (D-Park Forest), now The Illinois Cannabis Regulation Oversight Officer

These new licenses, literally pathways to financial freedom if operated correctly and efficiently, are revenue machines capable of changing our community. This change does not come from providing jobs (although jobs do help and will be available), but by providing capital to rebuild. These funds can provide scholarships, business loans, even small infrastructure projects can get accomplished via the tax revenue generated by the local governments. We have already made a written commitment to give a portion of net margins to the village. Capital in the right hands can make dreams come true. In theory, poverty can be solved. Poverty is not a prerequisite to the American way of life. That is why we were so proud to get zoning approval by our village. They see what we see. We can change neighborhoods like Beacon Hill. The dollars must recirculate in the community. Wherever you see high poverty rates you see high crime rates. This is not a coincidence. If you can lower the poverty rate you can lower the crime rates. This raises the quality of life for everyone. We see the state is on board, the county is on board, the Village of Park Forest is on board and the citizens of the community are on board. Now all we need is the license and capital to get the resurrection started.

Unlike other applicants, we were only capable of applying for one license for a craft grow facility. Some may see this as a disadvantage because only 40 licenses will be issued for this purpose. I wish we could have applied for more to increase our odds, but resources were scarce and applying was not cheap. We decided to stick with the efficient market theory and put all our eggs in the one basket that we know we can carry and be successful with. Without the help of Justice Grown, we would’ve never completed the application so shout out to them and anyone else that helped “true” social equity applicants apply.

The wheels are in motion so all we can do is wait to see who wins. I would hate to be on the team who must decide who wins these licenses. Everyone knows large corporations found ways to apply as social equity applicants because they only needed a certain number of “social equity” employees to qualify. But if you go ask the employees, not the owners, if they have been cured of their financial burdens and see if $15 has raised their quality of life to a middle-class level. The answer is emphatically NO. You cannot give out band-aids for heart attacks. If these large corporations are awarded the licenses, it will perpetuate the cycle of poverty. We do not personally have anything against the big companies. Like Toi Hutchinson said regarding the first round of dispensary and cultivation licenses: we needed the big company dollars to fund the next round of licenses. Well, the next round is here. Let’s do right by the communities that were truly affected by the war on drugs and on a more personal level and my reason for applying: let’s do right by my husband because he lost 3.5 years of his life and was excluded from participating with his family for doing what is now legal.

The Dawn of Delivery: How This Oregon Company Launched During a Pandemic

By Aaron G. Biros
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Back in late 2016, the Oregon Liquor Control Commission (OLCC) legalized delivery for cannabis products. Since then, dispensaries could offer a delivery option for their customers to purchase cannabis products without leaving the comfort of their home. Up until quite recently, that market was dominated by a handful of dispensaries who also conduct business at their physical location, offering delivery as an option while conducting most sales in-person.

Enter Pot Mates. Founded in 2018 by Hammond Potter, the company embarked on the long regulatory road towards licensing and beginning operations. On April 20, 2020, Pot Mates opened for business, starting their engines to take on the fledgling cannabis delivery market in Portland.

Pot Mates is a tech startup through and through. The founders are former Apple employees. Hakon Khajavei, the chief marketing officer at Pot Mates, founded Blackline Collective, a business and marketing consultancy, which is where he joined the Pot Mates team. The other co-founder of Pot Mates and chief technology officer, Jason Hinson, joined after serving in the US Navy as an electronics technician maintaining satellite communications networks.

With the sheer amount of regulations for cannabis businesses, coupled with the new delivery-based business model, Pot Mates had to focus on technology and automation from the get-go.

Not Just an Online Dispensary

For the cannabis companies already offering delivery in the Portland metro area, their websites seem to mimic the in-person dispensary experience. They offer dozens of products for each category, like concentrates, edibles and flower, making a customer pour through options, all at different price points, which can get confusing for the average consumer.

The Pot Mates logo

Pot Mates does things a little differently. “Our start up process was thinking through how do we make this the best experience possible, how do we get rid of the unnecessary junk and how do we do things that only an online dispensary can do,” says Khajavei. They have flat pricing across the board. In each category, almost every product is priced the same, moving away from the common tiered-pricing model. This, Khajavei says, removes the decision barriers customers often face. Instead of choosing the right price point, they can choose the delivery mechanism and effect they desire uninhibited by a difference in cost.

It all comes back to focusing on the simplest way for someone to buy cannabis. “Shopping online is just very different,” says Khajavei. “Our process focuses on the customer journey and limits the number of products we offer. We have a mood system, where we tag our products from reviews to typify moods that you experience with different products.” All of that requires a lot of back-end technology built into their website.

The Long Regulatory Road

Technology has been a strong suit for Pot Mates since they opened their doors, and well before that too. Making the decision to be an online-only delivery cannabis company pushed them to pursue a very unique business model, but regulations dictate a lot of the same requirements that one might see in dispensaries.

Hakon Khajavei, Chief Marketing Officer

The same rules apply to them when Pot Mates submitted their license application. You need to have a signed lease, extreme security measures, detailed business plans, integrated seed-to-sale traceability software (Metrc in Oregon) and much more. “During the months leading up to getting our license, we were able to iron out a lot of the regulatory details ahead of time,” says Khajavei. A lot of that was about security and tracking their products, which is why technology plays such a huge role in their ongoing regulatory compliance efforts. “We built in a lot of automation in our system for regulatory compliance,” says Khajavei. “Because of our technology, we are a lot faster.”

In the end, their licensing process through the state of Oregon as well as the city of Portland took about nine months. Once they had the license, they could finally get down to business and begin the process of building their website, their POS system, their inventory and reaching out to partners, producers, distributors and growers.

For any cannabis company, there are a number of regulations unique to their business. “We need to report every product movement in house through Metrc,” says Khajavei. “Every time something is repackaged it needs to be reported. We focus so much on our technology and automation because these regulations force us to do so.” But delivery companies are required to report even more. Pot Mates needs to report every single movement a product makes until it reaches the customer. Before the delivery can leave the shop, it is reported to Metrc with an intended route, using turn-by-turn directions. It complicates things when you make two or more deliveries in one trip. Reporting a daisy chain of deliveries a vehicle makes with turn-by-turn directions to regulatory authorities can get very tedious.

As far as regulations go for delivery parameters, they can legally deliver anywhere inside Portland city limits. “It is our job to figure that out, not the customer’s job; so we don’t have any distance limits, as long as it is residential,” Khajavei says. “We programmed customized technology that allows us to handle really small orders.” Without a minimum order policy or a distance limit, Pot Mates can reach a much bigger group of consumers.

Launching in the Midst of a Global Pandemic

Chief Technology Officer, Jason Hinson

Luckily, the Pot Mates team received their license just in time. About two weeks after they submitted their application, Oregon put a moratorium on any new dispensaries.

They went forward with their launch on April 20 this year, despite the coronavirus pandemic impacting just about every business in the world, including their marketing efforts tremendously. With cannabis deemed essential by the state, they could operate business as usual, just with some extra precautions. What’s good for PotMates is that they don’t need to worry about keeping social distancing policies for customers or curbside pickup, given the lack of storefront.

They still need to keep their team safe though. The Pot Mates team began 3D printing washable and reusable face masks, getting more gloves for delivery drivers, cleaning their warehouse thoroughly, cleaning vehicles and making sure employees maintained distancing. Pot Mates is even 3D printing enough masks and donating them to local organizations that need access to masks. “As a cannabis company, we always have to handle things with gloves here and take necessary safety precautions anyway, so our response is more about how we can help than what we need to change.”

Advertising Cannabis in a Pandemic is No Easy Task

“The marketing aspect is where covid-19 really hurt us,” says Khajavei. “There are so many regulations for cannabis companies advertising already. Unlike other products, we can’t just put up advertisements anywhere. We have to follow very specific rules.” So, in addition to the normal marketing woes in the cannabis industry, the team then had to deal with a pandemic.

Pot Mates had to scrap their entire marketing strategy for 2020 and redo it. “We wanted to begin with a lot of face-to-face marketing at events, but that didn’t quite work out so well.” Without any concerts, industry events or large gatherings of any kind, Pot Mates had to pivot to digital marketing entirely. They started building their SEO, growing their following on social media, producing content in the form of blogs and education around cannabis and the local laws.

On an Upward Trajectory

Obviously, the short-term problem for a new cannabis company is reaching people, especially during the COVID-19 crisis. “We have a good trajectory though, we know we are growing our business, but we still have a ways to go,” says Khajavei. It doesn’t help that social media companies have nonsensical policies regarding cannabis. Their Facebook page was recently removed too.

Founder & CEO of Pot Mates, Hammond Potter

But the bigger issue here is kind of surprising when you first hear it: “It’s not even a matter of customer preference, a lot of people just have no idea that delivery is even legal.”

It’s pretty evident that cannabis delivery has not really gone mainstream yet. “We’ve told people about our business in the past and a common answer we get is, ‘Oh my gosh, I didn’t even know we could get cannabis delivered.’” It’s never crossed their mind that they can get cannabis delivered to their home. It’s an awareness problem. It’s a marketing problem. But it’s a good problem to have and the solution lies in outreach. Through educational content they post on social media and in their blog, Khajavei wants to spread the word: “Hey, this is a real thing, you can get cannabis delivered.”

As the market develops and as consumers begin to key in on cannabis delivery, there’s nowhere to go but up. Especially in the age of Amazon and COVID-19 where consumers can get literally anything they can dream of delivered to their front door.

Moving forward, Pot Mates has plans to expand as soon as they can. Right now, they’re limited to Portland city limits, but there’s a massive population just outside of Portland in towns like Beaverton, Tigard and Tualatin. “We are so close to these population centers but can’t deliver to them now because of the rules. We want to work with OLCC about this and hopefully change the rules to allow us to deliver outside of the city limits,” says Khajavei. In the long term, they plan to expand out of state, with Washington on their north border being first on the docket.

To the average person, one would think launching a delivery cannabis business in the midst of a global pandemic would be a walk in the park, but Pot Mates proved it’s no easy task. As the market develops and the health crisis continues, it seems the Oregon market will react positively to the nascent delivery market, but first they need to know it is even an option.