Three years ago, Canada became one of the first countries in the world to legalize and regulate cannabis. We’ve covered various aspects of cannabis regulation since, but now with a few years of data readily available, it’s time to step back and assess: what can we learn from three years of cannabis recalls in the world’s largest legal market?
Labelling Errors are the Leading Cause of Canadian Cannabis Recalls
Our analysis of Health Canada’s data revealed a clear leader: most cannabis recalls since legalization in October 2018 have been due to labelling and packaging errors. In fact, over three quarters of total cannabis recalls were issued for this reason, covering more than 140,000 units of recalled product.
The most common source of labelling and packaging recalls in the cannabis industry (more than half) is inaccurate cannabinoid information. Peace Naturals Project’s recall of Spinach Blue Dream dried cannabis pre-rolls this year is a good example. Not only did the packaging incorrectly read that the product contained CBD, but the THC quantity listed was lower than the actual amount of THC in the product. The recall covered over 13,000 units from a single lot sold over 10 weeks.
In another example, a minor error made a huge impact. British Columbia-based We Grow BC Ltd. experienced this firsthand when it misplaced the decimal points in its cannabinoid content. The recalled products displayed the total THC and CBD values as 20.50 mg/g and 0.06 mg/g, respectively, when the products contained 205.0 mg/g and 0.6 mg/g.
Accurate potency details are not just crucial for compliance. For many customers, potency is a deciding factor when selecting a cannabis product, and this is especially important for medicinal users (including children), people who are sensitive to certain cannabinoids and consumers looking for non-psychoactive effects. In this case, at least six consumer complaints were submitted to Peace Naturals Project, the highest number for any cannabis recall in Canada.
Pathogens are the #2 Cause of Cannabis Recalls in Canada
Pathogens are the second most common cause of recalls in Canada, claiming 18% of total cannabis recall incidents. And while that doesn’t sound like much compared to the recalls caused by labelling errors, it affects the highest volume of product recalled with over 360,000 units affected.
Canadian Cannabis Recalls – Total number of affected units and noted causes
A primary cause of allergens and microbiological contamination of cannabis products is yeast, mold and bacteria found on cannabis flower (chemical contaminants like pesticides can also be a major concern). Companies like Atlas Growers, Natural MedCo and Agro-Greens Natural Products have all learned this lesson through costly recalls.
These allergenic contaminants pose an obvious health risk, often leading to reactions such as wheezing, sneezing and itchy eyes. For people using cannabis for medical conditions and may be more susceptible to illness, pathogens can cause more serious health complications. Moreover, this type of cannabis recall not only drives significant cost since microbiological contamination of flower could easily affect several product batches processed in the same facility and/or trigger downstream recalls, but also affect consumer confidence for established cannabis brands.
Preventive control plan requirements for cannabis manufacturers mandate that holders of a license for processing that produce edible cannabis or cannabis extracts in Canada must identify and analyze the biological, chemical and physical hazards that present a risk of contamination to the cannabis or anything that would be used as an ingredient in the production of the edible cannabis or cannabis extract. Biological hazards can come from a number of sources, including:
Incoming ingredients, including raw materials
Cross-contamination in the processing or storage environment
Employees
Cannabis extract, edible cannabis and ingredient contact surfaces
Air
Water
Insects and rodents
To mitigate risks, addressing root causes with preventative measures and controls is essential. For instance, high humidity levels and honeydew secreted by insects are common causes of mold on cannabis flowers. Measures such as leaving a reasonable distance between plants, using climate-controlled areas to dry flowers, applying antifungal agents and conducting regular tests are necessary to combat such incidents.
Preventative measures and controls can save a business from extremely costly recalls.
Of course, placing all the necessary controls into action is not as simple as it may sound. Multiple facilities and a wide range of products in production mean more complexity for cannabis producers and processors. Any gaps in processing flower, extracts or edibles can result in an uncontrolled safety hazard that may lead to a costly cannabis recall.
These challenges are not just limited to cannabis growers. The food industry has been effectively mitigating the risk of biological hazards for decades with the help of food ERP solutions.
Avoid Recalls Altogether with Advanced ERP Technology
An effective preventative control plan with regular quality checks, internal audits and standardized testing is important to minimize the threats evident from Canada’s recall data. If these measures ever fail, real-time traceability systems play a pivotal role in the event of a cannabis recall by enabling manufacturers to trace back incidents to the exact point of contamination and identify affected products with surgical precision.
Instead of starting from zero, savvy cannabis industry leaders turn to the proven solutions from the food industry and take advantage of data-driven, automated systems that deliver the reliability and safety that the growing industry needs. From automated label generation to integrated lab testing to quality checks to precision traceability and advanced reporting, production and quality control systems are keys to success for the years ahead.
The supply chain for consumer cannabis products is complex, involving cultivation, extraction, manufacturing and packaging. While global best practices exist for Good Agricultural Practices (GAPs) and Good Manufacturing Practices (GMPs), the certifications are not tailored to the cannabis industry.
CSQ has developed tailored standards for the cannabis industry to assist cannabis companies in improving their quality. As a division of ASI, a woman-owned business that’s provided safety solutions to the food industry since the 1940s, the CSQ standards were built in 2020 to meet ISO requirements, GFSI requirements and regulatory cannabis requirements from seed-to-sale. CSQ is the first cannabis certification program to meet the GFSI Benchmarking Requirements with plans to be benchmarked in 2022.
We interviewed Tyler Williams, CTO and founder of CSQ. Tyler founded CSQ after working at ASI – a family-owned food safety company in St. Louis.
Aaron Green: Nice to meet you, Tyler. How did you get involved in the cannabis industry?
Tyler Williams: It’s kind of a long story, but it’s a good story. My mom worked for ASI for 15+ years. That company has been around since the 1940s and is one of the oldest food safety companies in the world. The owners were ready to sell about five or six years ago, and my mom ended up using a small business loan to purchase the company. That’s how I got started in a food safety and dietary supplement space.
About three to four years ago, we started getting inquiries from cannabis companies asking about GMP audits and certification and different things. We started doing certifications to our GMP food processing standard or dietary supplements depending on what they wanted but realized that there were a lot of things that weren’t applicable to cannabis companies or there were extra things needed for cannabis companies. That’s how I started working with cannabis companies to start developing the CSQ certification program and it has just kind of grown over the years.
Tyler Williams, CTO and founder of CSQ
We currently have four standards at the CSQ level. CSQ plans on being benchmarked to GFSI which stands for Global Food Safety Initiative. We plan on going through that process to get the benchmark next year. There are four standards underneath CSQ: one for growing and cultivation; one for extraction; one for food and beverage edibles; and then cannabis dietary supplements. We’re looking to add standards for cosmetics, cannabis contact packaging materials, retail and consumption lounges.
Last year, when we were doing our pilot audits, we realized that the CSQ standard was great for medium to big sizedMSOs because they’re already doing these best practices. It’s easier for them to, you know, implement a few things, and then get certified, whereas for the smaller guys who might be coming from the illicit market, it’s a lot harder – it’s a lot bigger jump from them to go from zero to 100. Last month, we released our unaccredited cGMP, cGMP+, cGAP and cGAP+ standards. The difference between the regular and the plus is that the plus has HACCP (Hazard Analysis Critical Control Point) and then it also includes a recall module where the site must do a mock recall while the auditor is on-site.
CSQ doesn’t perform the audits. We license the use of our standard to accredited certification bodies and then they must get accredited to be able to certify companies under the CSQ name.
Green: Can you tell me a bit about the genesis of CSQ and the structure of the organization?
Williams: We’re a for-profit company. We thought about going the non-profit route but it’s a lot more intricate and a lot more people involved when you go that route. Our parent company is ASI, and we are under the ASI global standards division which is responsible for developing standards. So, CSQ is one of those standards under that brand and that’s kind of the foundation of it. We have two licensed certification bodies right now. ASI has a certification body, and they are one of our licensed CBs and then WQS, who’s based out of North Carolina and has a big presence in South America which is great because we’re starting to get inquiries from companies in South America as well.
Green: How do you go about building industry awareness and acceptance of the standard?
Williams: Building awareness really started with going out to the medium- to large-sized companies and saying, “Will you open your doors and let us come and basically do all these audits for free at your facility just so we can kind of get a baseline across the industry?” So, that started the conversation with industry. The MSOs in the medium- to large-sized companies, are more ready to go through the certification process because they know that federal legalization is around the corner. They know these things are going to have to be in place already so they’re just doing it as preparation. There isn’t much demand for retailers right now like there is in the food and or dietary supplement space. So that’s where the demand is really coming from – wanting to self-regulate in preparation for federal legalization.
Most of our outreach is education-based. We speak at a lot of conferences. We host a lot of webinars and free events and things like that, just to get the word out about CSQ. A lot of people know what GMPs are, or know that they should be following GMPs, but they don’t necessarily know how to get from point A to point B. Our job is to educate them that it’s not as hard as they think it is and it’s not as expensive as they think it is. The cost of an audit is relatively inexpensive. What I always tell people is the sooner you start preparing, the cheaper the whole process is. What happens a lot of times is a facility will not build out their facility to GMP specifications, and then they want to get GMP certified so they must move the hand washing station from the back of their facility to the front where the employee entrance is or things like that. The sooner these companies start thinking about it, the better and that’s basically what we’re trying to do is just educate the industry about that kind of preparation.
Green: cGMP and cGAP are perhaps more broadly accepted outside of the cannabis industry. Do cGMP and cGAP fall under the CSQ certification?
Williams: There are four ingredients that make up the CSQ standard. There are industry best practices, which are specific to just the cannabis industry. There are good manufacturing practices, or good agricultural practices, that are just accepted globally. Then we look at the Codex Alimentarius, which is the global food code. Every country mustwrite their federal rules on food based off this standard. We use the Codex when we’re talking about edibles and things like that. And then the last aspect of CSQ is the GFSI benchmarking requirements. So that’s kind of the basis of our program, making sure that the auditors have certain amount of audit hours, and we have training and processes in place for that. That’s where the GFSI benchmarks are coming out. So, all those four things kind of really create the CSQ standard.
Green: There are clear internal benefits to a company for holding to a quality standard. What are the downstream benefits to the companies that have CSQ? How do the end-users know about it?
Williams: I come from the food industry and if you go to the grocery store, you just assume that everything’s safe.Consumers don’t even think about the certifications that those companies must get to even be able to sell their product in retail stores. They don’t necessarily put those certifications on the packaging material, because as a consumer “SQF” means nothing to most consumers, right? It would only mean something if you’re in the industry.We’re trying to be different with CSQ and get more consumers aware of it. One of the things that we have is a database of certified facilities. Consumers will be able to say, “Okay, maybe I’m interested in this new brand. Are they certified to this program or not?” and be able to see that. We’re also trying to get companies to put the CSQ logo once they’re certified on their marketing materials.
Now, one thing that we cannot do yet is put the logo on the finished product packaging, because we don’t have a testing addendum, but we’re working on that. There’s not a lot of demand for it right now and it’s more expensive audit costs, where you’re talking about lab tests, and things like that. So, it’s something that we’re working on, but we haven’t fully developed yet.
Green: Next question is around d-8 THC and federal regulations. What’s your position on d-8 and how are you thinking about d-8 trends in the future?
Williams: d-8 THC itself as a product, I think it’s fine. I think if it’s made safely, we know all the components I think it’s fine from that aspect. The problem that we have right now is it’s not regulated. That’s where I think we need to have these states that have legalized THC or hemp to then implement rules and regulations and bring d-8 THC into those rules and regulations. And so maybe then it’s only those licensed facilities that are inspected by the state that are producing those products and not just some guy out of his garage. I think a lot of people right now are just wanting to ban it completely and I don’t think that’s the best approach. There’s nothing wrong with the product itself, it’s just how it’s being produced right now in the gray area where no one’s regulated.
Green: What in your personal life or in cannabis are you most interested in learning about?
Williams: I love what I do. I’m always looking at and reading regulations and then trying to learn something new. I’ve been going through organic certification training right now. At some point, CSQ will probably go down the route of having some sort of organic certification. So that’s been kind of what I’ve been working on and learning right now. But I’m a sponge and I like to absorb new information about the industry.
Green: Thanks Tyler, that concludes the interview!
As we continue to witness and experience the medical cannabis industry grow and mature, many of us are wondering where the head-to-head clinical studies are, and why aren’t there more clinical research studies taking place?
Cannabis products created with the intention for medicinal use often state that their formulations and products stack up against traditional pharmaceutical treatments. However, without a substantial number of clinical studies being performed, it’s difficult to truthfully make such a claim. It’s one thing to share testimonials from people who use particular products and report what their experiences were like. However, to go head-to-head in a controlled environment where factors such as underlying conditions, height, weight, medication, lifestyle and nutrition habits are taken into account to accurately compare the efficacy of a traditional pharmaceutical product versus a cannabis-derived product are two completely different things.
The Need for More Capital
Wouldn’t you agree that if a company is having tremendous success with a particular product, that they’d reinvest capital into a true clinical study to have data to support their marketing efforts? Investing into proper studies would not only benefit a company working hard to earn market share, it would benefit those who are relying on a particular product to regain a quality life. As we’ve learned over the years from numerous scientists and researchers digging into the cannabis plant at a more granular level, there’s much more to the medicinal benefits than meets the eye. Discovering new information about how cannabinoids such as CBG and CBN combined with CBD and certain terpenes can create specific effects has helped make a greater impact on the medical cannabis community. Bringing these powerful blends of anti-inflammatory, cannabis-derived compounds and other immune boosting nutraceuticals to head-to-head clinical studies could be a huge step forward towards further legitimizing the healing effects that cannabis has to offer.
Measuring Efficacy Goes Beyond COAs & Product Reviews
Determining the efficacy of medical cannabis products should be viewed in the same light as traditional pharmaceutical products. Traditional clinical studies are designed with an Institutional Review Board (IRB) approval, subject recruitment, electronic data capture as well as electronic patient reported outcomes. Some companies within the cannabis space have made attempts to conduct surveys with measuring efficacy in mind, but using outdated survey technology that hasn’t been validated only leads to insufficient data collection.
Discovering new information about how cannabinoids can create specific effects has helped make a greater impact on the medical cannabis community. Image: Peggy Greb, USDA
There is nothing wrong with adult-use cannabis. However, for the medical cannabis space to be taken more seriously, it is time for organizations to step up their efforts and take note of certain practices from traditional biotech organizations when it comes to clinical research and collecting data to correctly quantify efficacy of certain products. Well-thought-out studies designed with clinical endpoints and validated questionnaires is a strategic way for the industry to take big steps towards doing what is right for patients.
Patients Are Asking For More Research
After speaking with patients who are interested in pursuing a treatment that includes the responsible use of medicinal cannabis, the one thing they all have in common is the desire for more information that they can rely on to make better decisions. Is it time for patients to push the envelope and not purchase products from companies that are not willing to perform the clinical studies? If companies suffered a loss in sales as a result, would they reconsider their stance on reinvesting capital into clinical trials with their products?
Equally as important as proper research is perpetual tele-monitoring. The value in perpetual tele-monitoring is the data. We can showcase miraculous, life-changing stories of how medical cannabis has helped people turn their lives around. However, when seeking greater buy-in from groups like the FDA, data is key. Qualitative data can go only go so far. It’s the quantitative data that will help move the medical cannabis community forward. The ability to be able to review data on an ongoing basis would enable medical cannabis companies to evaluate how products are working based on the electronic data capture, along with questions that a company may develop to ascertain individualized product feedback.
Imagine having the ability to see patients’ data based on real-time, daily, through something as convenient as a wearable device. Understanding test results and correspondence with doctors for patients would significantly improve.
As the legality and availability of hemp and non-hemp cannabis products continues to grow, having strong, recognizable brands will become increasingly important in order to stand out from the competition. Unfortunately, strong brands invite knock-offs and can require aggressive policing. Registering your trademarks makes policing much easier, but registration of marks used to sell hemp and non-hemp cannabis products requires strategy and forethought.
Why Register?
Trademark rights flow from use, so a registration is not required for enforcement. However, “common law” rights based on use alone must be proven in each instance, and you must show that your use of the mark has been sufficient such that consumers recognize and associate it with your goods or services. This can be difficult, expensive and time consuming. Also, common law rights are territorially limited. Even if you can prove such rights in Oregon (for example), you may have no right to prevent use of your mark in other states. State trademark registrations are similarly limited, but are presently all that is available for marks used exclusively to sell non-hemp cannabis products.
By contrast, a federal trademark registration provides the registrant a nationwide, exclusive and presumed right to use the mark in association with the designated goods and services. In addition, counterfeit use of a federally registered trademark can lead to statutory damages. That is, you don’t have to prove an amount of harm—a court may simply award damages based on statute. Yet another benefit is the ability to file based on an “intent to use.” You can thereby reserve a mark nationwide for up to three years before you must show use. Federal registration is available for marks used to sell hemp products, but with some strict limitations as discussed below.
Use in Commerce Requirement
Federal registrations are issued by the United States Patent and Trademark Office (the Office) once an application is approved and use in commerce is demonstrated. To satisfy the “use in commerce” requirement, an applicant must show that a mark is being used in association with the sale of goods or services that are legal to trade under federal law. Sale of products not legal under federal law simply does not count to establish trademark use for purposes of federal registration. This is where the vast majority of federal trademark applications for use with cannabis products get rejected. A search of the federal registry shows that, of over 8000 trademark applications for products containing cannabis extracts, only about 1,300 have resulted in registrations. But these 1,300 illustrate that there is a path to success.
Allowable Goods
The Office traditionally rejected all applications for use with products containing any cannabis extracts under the Controlled Substances Act (CSA). The Agricultural Improvement Act of 2018, commonly known as the Farm Bill, created an exception to the CSA for hemp, defined therein as cannabis extracts containing < 0.3% THC by dry weight. Based on this, the Office began allowing applications provided they designate only goods having 0.3% THC content or less. But even that limitation isn’t sufficient for some types of goods.
Unless specifically disclaimed, the Office will assume the presence of CBD in products containing cannabis extracts, regardless of THC quantity. On that basis it will reject applications for hemp products that are ingestible (food, drinks, nutritional supplements, etc.), or that claim a medical or therapeutic purpose, under the Food, Drug & Cosmetic Act (FDCA). The FDCA requires Federal Drug Administration (FDA) endorsement to add “drugs” to such products, the FDA classifies CBD as a “drug,” and the FDA has authorized only a few products that include CBD. Thus, an allowable good that is ingestible or therapeutic must not only contain the low THC disclaimer, but must also state an absence of CBD. Notably, the Office has not been rejecting products on the basis that they contain CBG (cannabigerol) or other naturally occurring non-THC, non-drug cannabinoids.
Are the Goods Sold Really Allowable?
Of course this scheme of word-smithing designations to obtain allowance of federal trademark registrations invites error, if not fraud. Registrations are subject to cancellation if use of the mark with the designated goods is not maintained, or if it can be shown that the registration was fraudulently obtained. Thus, critical to a claim of use is that the applicant offers products that actually meet the designation description. The Office does not check for THC levels or CBD presence, and most purveyors of hemp products don’t either. Indeed, there is not even a standardized method for measuring these things. However, studies show that more than half of hemp products either purposefully or accidentally misrepresent their actual THC and CBD levels.i Though legally untested, this presents a potential problem for many existing federal registrations.
If a mark registered for use with goods having < 0.3% THC is found to be used only with products that actually have a greater amount of THC in them, the registration could be canceled. The same fate could befall a registration for goods claiming to have no CBD that, when tested, actually do contain more than trace levels. Even if non-hemp cannabis products are legalized under federal level, registrations obtained with THC and/or CBD limitations would still require the registrant to use the mark with products meeting such limitations.
Keeping Evidence for Insurance
So long as a registrant has maintained use of the registered mark “in commerce” in association with the designated goods, the registration is insulated from attack based on claims of non-use or fraud. The fact that the registrant also uses the mark for goods that are not legal on the federal level is of no consequence to the registration. Thus, it is wise to include in the product lineup under the brand to be protected at least some good that meets the present requirements for federal trademark registration.
One option is to include a product where the only cannabis extract is from hemp seed oil. Without even testing it, you can be reasonably assured that such a product will contain little or no CBD or THC. Another option short of testing is to obtain a certification or warrant from your supplier that particular ingredients truly are hemp, i.e., have < 0.3% THC by dry weight. This could be relied on as evidence should no original product be available for testing to show that use was legitimate at the time registration was obtained. If you can’t obtain such a certification, testing the occasional sample and keeping records over time would also work. Product samples can now be tested for THC content for around $100 per sample, with results back in about a week.ii
Zone of Natural Expansion
Though non-hemp cannabis products cannot be covered directly by federal registrations, a federal registration for CBD/hemp products can have spillover benefits. This is because the scope of a registration may expand to cover things similar to what is designated. The question comes down to likelihood of confusion. Imagine a company holds a registration covering LOOVELA for “nutritional supplements containing hemp seed oil having no CBD and < 0.3% THC by dry weight.” It would be logical for a consumer to assume that non-hemp cannabis products sold under the LOOVELA mark would likely be made by the same company. Thus, provided the company actually sold products complying with its designation, it could assert the CBD-based registration to prevent sale of LOOVELA branded non-hemp cannabis products. Also, should such products be legalized federally, the company would likely be the only applicant able to obtain an additional federal registration for LOOVELA for use with them, because any competing attempt would be confused with their pre-existing registration for CBD/hemp products.
In conclusion, it should be noted that the law in this space is evolving rapidly and is nuanced. Every situation is unique in some way, and there are many reasons an application may fail or a registration may be attacked that are not addressed above. But there is value in obtaining a federal registration for your hemp brands, and there is an overall strategy to be employed for brand protection in the cannabis space.
The content above is based on information current at the time of its publication and may not reflect the most recent developments or guidance. Neal Gerber Eisenberg LLP provides this content for general informational purposes only. It does not constitute legal advice, and does not create an attorney-client relationship. You should seek advice from professional advisers with respect to your particular circumstances.
References
See, e.g., Bonn-Miller, Marcel O., et al., “Labeling Accuracy of Cannabidiol Extracts Sold Online,” Journal of the American Medical Association, Vol. 318, No. 17, pp. 1708-09 (Nov. 7, 2017); Freedman, Daniel A. and Dr. Anup Patel, “Inadequate Regulation Contributes to Mislabeled Online Cannabidiol Products,” Pediatric Neurology Briefs, Vol. 32 at 3 (2018).
Practicing Law Institute Press’s Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is a one-of-a-kind deep dive into the many regulations governing the industry. Aimed at attorneys representing clients in this space, the treatise offers guidance on a range of interrelated topics including state regulation of medical and non-medical cannabis; federal law, enforcement and preemption and their implications for employment, taxes and banking; and the various aspects of establishing and managing a cannabis enterprise, from growth to licensing, transport and distribution. We spoke with co-authors James T. O’Reilly, professor of Public Health Policy at the College of Medicine of the University of Cincinnati and author of leading references on food and drug law, and Edgar J. Asebey, a founding partner of Keller Asebey Life Science Law and a life sciences attorney with over twenty years of experience, about the intersection of the cannabis business and the law.
Q: From the legal industry’s perspective, how has this area of the law evolved over the past few years – and what would you advise clients in cannabis to look for when engaging legal assistance for their businesses?
James T. O’Reilly & Edgar J. Asebey: Over the past few years, we have seen a growing acceptance of the idea that lawfully serving the needs of cannabis consumers is a commendable business initiative. This evolution in thinking – tied to the myriad business opportunities cannabis presents – has given large, mainstream corporate law firms the incentive to grow practices and develop specialists in this area, which is a very positive development.
But it is not enough for lawyers to know their way around M&A and the capital markets; they must also have experience with federal regulatory bodies. As regulations continue to evolve, it is essential for practitioners to be familiar with the Food, Drug and Cosmetics Act as well as the Federal Trade Commission Act. The framework for regulating cannabis products already exists, as can be seen in the Warning Letters sent to hemp and CBD companies by both the Federal Trade Commission and Food and Drug Administration (as well as, most recently, the FDA and CDC’s warning about delta-8 THC). If a client places their hemp or CBD product into the stream of commerce, that product will be subject to FDA, FTC and relevant state laws. We strongly recommend seeking out advisors who truly understand these regulations and how they align with the regulatory agencies’ procedures and agendas.
Q: What are the most urgent legal and regulatory topics the industry is watching these days?
O’Reilly & Asebey: Our treatise follows and analyzes the most pressing legal issues facing those in the cannabis and hemp space. In our most recent edition, we add discussion of the Final Rule for the establishment of a domestic hemp production program. We think this is a significant development in that it attempted to address some of the industry’s criticism of some provisions found in the Interim Final Rule, particularly around issues of sampling and testing for THC content. The Final Rule clarified issues around THC percentage testing methodologies, but disappointed many in the industry by leaving in place the low 0.3% dry weight threshold for an acceptable hemp THC level. On the other hand, The Final Rule raises the threshold for a negligent violation from 0.5% to 1.0% total THC and limits the number of violations a grower can receive in one year to one, easing potential penalties for violations.
Of course, the regulation of CBD products is on the minds of many in the industry. Key questions remain about whether cannabinoids such as delta-8 THC can be lawfully sold. Since the FDA has provided no clear guidance with regard to the sale and use of CBD and other hemp-derived cannabinoid-containing products, well-meaning businesses find themselves operating in a regulatory gray area. While some states have raced to place delta-8 THC on their controlled substances lists or otherwise regulate it, at the federal level it remains unclear. Our book provides a legal argument showing that current regulations support the lawful production and sale of delta-8 THC. To date, this and other legal arguments have not been tested in the courts and, without FDA guidance, the delta-8 THC sector will remain gray.
Editor’s Note: The Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is now available for purchase here.
About James T. O’Reilly
James T. O’Reilly of the University of Cincinnati College of Medicine is former chair of the 8,000-member Section of Administrative Law & Regulatory Practice of the American Bar Association and has been active in numerous ABA, Federal Bar Association, and state and local bar activities. He retired as Associate General Counsel of The Procter & Gamble Company to teach full-time, and served as a consultant to three federal agencies and to the Deputy Secretary General of the European Commission. He has authored fifty-six texts and more than 230 articles, and his work was cited numerous times in appellate opinions, including “The experts have written . . . ” in a March 2000 opinion of the U.S. Supreme Court (Food & Drug Administration v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291). He has received numerous honors and awards for his professional and electoral activities and has been listed in Who’s Who in American Law for twenty-five years. He is a graduate of Boston College and the University of Virginia School of Law.
About Edgar J. Asebey
Edgar J. Asebey, a partner at Asebey Life Sciences Law PLLC, is a regulatory and transactional attorney with over two decades of experience in federal regulation of pharmaceutical, biotechnology, medical device, food, dietary supplement and cosmetics companies. Since 2015, he has been working on cannabis-related matters and transactions, and since 2018, he has provided regulatory compliance, business transactional, venture finance and international trade services to hemp/CBD companies. Mr. Asebey practices before the FDA, the USDA, the CBP, the EPA, and the FTC, representing client companies on regulatory compliance, product approval/registration and FDA enforcement defense matters. He founded and served as president of Andes Pharmaceuticals, Inc., a natural products drug discovery company, from 1994 to 2000, and has served as in-house counsel to two life sciences companies. Mr. Asebey is a member of the American Bar Association (Section on Administrative Law & Regulatory Practice: Food and Drug Committee and International Committee), the Food & Drug Law Institute (FDLI), the Dade County Bar Association, and BioFlorida.
Botanical extraction is not specific to cannabis and hemp, and it is anything but new. Rudimentary forms of plant extraction have existed throughout history and evolved with high-tech equipment and scientific procedures for use in pharmaceuticals, dietary supplements and botanicals.
In food production, examples of hydrocarbon extraction processes are commonplace. Nut, olive and vegetable oil production use solvents to extract the oils. Decaffeinated coffee uses hydrocarbon extraction to remediate the caffeine, and making sugar from beets, or beer from hops, also requires solvents.
As such, the FDA has set guidelines for the amount of residual solvents considered safe for consumers to ingest. Yet, without FDA guidance in cannabis and hemp, many products aren’t being tested against these standards, and consumers will ultimately pay the price.
Understanding solvent remediation technology and processes
If we use ethanol extraction as an example, the extraction process is relatively simple. First, we soak the biomass in denatured or food-grade ethanol, ending up with a final solution that is 90-95% solvent. Then, we perform a bulk removal of the solvents, which takes out most, but not all, of the solvent. The next and final step should be to strip the remaining solvents from the extract entirely.
Stripping remaining solvents in bulk requires the right equipment.
But, in order to do so effectively, you need the right equipment, and unfortunately, this is where many producers fall short. Many producers use a vacuum oven to apply heat while reducing the headspace pressure to lower the solvent’s boiling point and evaporate it off.
However, it’s a static environment in a vacuum oven, which means the material is stagnant. So, the process may effectively remove the solvents close to the surface, but solvents deep inside the material tend to get trapped without some type of agitation or mixing.
The appropriate final step to complete solvent remediation is wipe-film distillation, which feeds small volumes into a column, which is then wiped into a very thin film and heated under vacuum pressure. Although the equipment necessary is costly, this last step removes any residual solvents from the product to create a safe, effective and consumable product.
Residual solvents present huge risks
As stated, many of the same solvents used in cannabis and hemp extraction have been considered safe in food production for decades. Reviewing chemical data sheets, many of the acceptable limits on solvents were determined for ingestion, which is fine for edibles and tinctures, but many cannabis and hemp products are intended for inhalation or vaporization.
Just a few of the dozens of various products types on the market today, extracted with a variety of different solvents
Unfortunately, some solvents can have negative health impacts, especially for those using cannabis or hemp for medical purposes or with compromised immune systems. Plus, as a therapeutic and recreational substance, consumers may be consuming more than the recommended amount, as well as using the products several times a day. Unfortunately, long-term exposure or repeated inhalation of these residual solvents hasn’t been thoroughly researched.
For example, inhaling ethyl alcohol (ethanol) can irritate the nose, throat and lungs. Extended exposure can cause headaches, drowsiness, nausea, vomiting and unconsciousness. Repeated exposure can affect the liver and nervous system.
In the food industry, hexane is approved for extracting spices or hops, and this solvent is widely used in cannabis and hemp extraction. However, if used in an inhalable product, chronic exposure to hexane could be detrimental, with symptoms including numbness in the extremities, weakness, vision problems and fatigue.
Consumers deserve transparency
In the industry’s earliest days, companies were tight-lipped about their processes, the chemicals they used and how they removed them. Everyone thought they had the “secret sauce” and didn’t want to share their approach. Today, companies are more open about what they use, how they process it and providing that necessary transparency.
Lack of quality and consistent regulations in these industries creates confusion for the consumers and loopholes for producers. Some producers test for everything under the sun, and some producers know exactly which labs will pass their products, regardless of test results.
While the regulatory bodies are distracted by the amount of THC that might linger in products, getting sick is overshadowed by the risk of getting high. In the meantime, consumers are left to their own devices to determine which products are safe and which are not.
Although testing mandates and regulations will help clean up the industry, until then, consumers need to demand full-panel COAs that not only show cannabinoid potency but also accurately display the test results for residual solvents, pesticides and heavy metals.
Vaping is a multi-billion dollar cannabis product category representing more than 20% category share in the US, according to a recent Headset.io report. The 2019 vaping crisis, whereby lung injury and several deaths were caused by the adulteration of vapor pen cartridges with vitamin E acetate, highlighted the importance of safety and emissions testing for vapor pen products. In addition to volatile organic compounds, metals and ceramics contained in the heating elements of cartridges are also a concern. While the FDA has a robust program for emissions testing in nicotine products, they do not currently regulate cannabis. Cannabis vaping is currently regulated at the state level in the United States.
Cannabis vaping is popular among minors owing to its discrete nature. In a recent study published in the Journal of the American Medical Association (JAMA), 14.7% of teens reported vaping cannabis in 2018. In a separate research study, University of Michigan researchers found that teens vaping cannabis were two times more likely to experience respiratory issues than teens who smoked e-cigarettes.
We spoke with Corey Mangold, CEO and founder of PurTec Delivery Systems, to learn more about cannabis vaping safety and their PurGuard technology. Prior to entering the cannabis space, Corey founded a software company in 1998. He also founded the advertising agency Gigasavvy in 2008, which he recently exited from in March 2021.
Aaron Green: How did you get started in the cannabis industry?
Corey Mangold: I got started in the cannabis industry in 2016. My daughter was away at college in San Luis Obispo and got pregnant and was going to have a baby, which obviously I was excited about. I decided to have her come down to Southern California and start a company together, as I’ve done multiple times in my career successfully. I wanted to show her the ropes, and teach her everything from finance to HR, to business development, marketing – everything it takes to be successful – and give her the tools that she would need to be successful for her life.
Green: What kind of things were you into before 2016?
Mangold: I founded my first company in 1998 in the software industry and had that company up until 2005. In 2008 I started another company called Gigasavvy, a nationally recognized advertising agency out of Irvine, California, which I successfully exited in March of 2021.
Corey Mangold, CEO and founder of PurTec Delivery Systems
When deciding to start a company with my daughter, we were interested in the cannabis industry – I think everybody was back in 2016. In 2016, I had started using cannabis again after probably about a 16- or 17-year hiatus. I was using a vape because I had children in the house. I went to literally anywhere I could and bought every type of cartridge on the market. What I found was that their user experience was not like what it was on the nicotine side of vaping. I reached out to associates of mine who had been manufacturing vapes since 2011, starting with the blue e-cigarette, and we engineered a unique device that was proprietary and completely unlike anything on the market. It was incredible, and still to this day, I think it’s probably the best 510 thread cart on the market. We launched that under the Orchid Essentials (CNSX: ORCD, OTC:ORVRF) brand in California and Oregon.
Green: Is that cart something that you sell to other brands as well, or is it purely for the Orchid brand?
Mangold: Yes, purely for the Orchid brand, but it’s what inspired me to start PurTec Delivery Systems. After a few years of struggling in this industry because we didn’t have the access to capital needed – Orchid is a US company traded on the Canadian Stock Exchange (CSE:ORCD, OTC:ORVRF) – and dealing in a substance that’s federally illegal, there was no access to any traditional financing, be it factoring or inventory financing. We were literally creating as much product as we could every month and then selling out almost instantly, and then waiting till the next month to get money in from all our accounts to make more. We had to slug it out. We did get into a little over 500 stores in California and Oregon, but it was just a battle, and I didn’t really want to be touching cannabis.
In 2020, I had a breakthrough in my strategy. I was watching the TV show Gold Rush and I watched one of the guys go and have to buy a new wash plant. He pulls up to this dealer’s yard that sells wash plants and tractors. I saw this dealer had a lot of inventory and clearly a lot of money, and I realized the place to make money was selling the shovels, not really digging for gold. I said to myself if I have the best shovel out there, why am I digging? I should just be innovating new shovels and selling shovels. Hence, I started PurTec Delivery Systems and now for the last year and a half have been 100% focused on developing advanced vaporizer technologies.
Green: Tell me more about PurTec.
Mangold: I founded PurTec with the sole intention of creating safe vaporizers for consumers. We conducted an 18-month safety study in Switzerland with our partners, on vaping devices in the market. I learned a lot of things that I already knew but wanted to see it proven by independent laboratories and by PhDs and MDs, and really see what was so concerning to me. For the last year and a half, we have sought to develop a safe line of vaporizers. I’m very cognizant about what’s going on in my body and want to know what’s going on internally with these products. I don’t think anyone would be using them if they knew what was really going into their lungs.
Green: What are some of the things that consumers should be thinking about when it comes to vape safety?
Mangold: Consumers should be thinking about all the different aspects from inhaling vaporized heavy metals to ceramics. Ceramic particle inhalation is one of my biggest concerns. I think it’s been ignored. I think all the manufacturers know about it and I think it’s been swept under the rug. I think it’s one of the threats that we have. There should be regulatory bodies that are out there protecting consumers like the FDA, hence why I believe federal legalization is so important, because if the FDA was involved not even one of these products would be on the market because the first thing the FDA would do would be very extensive emissions testing to find out what compounds and potential toxins are entering into your body.
Green: There’s clearly a need for safety and regulation in the space, but from where you’re sitting, is there a demand? When consumers go into a store, one of their main focuses is: what’s the THC content? How do you see consumer demand for safety and how do you think about building that awareness?
Mangold: I don’t think there is consumer demand yet. The consumer demand right now is for getting medicated and having fun or getting whatever relief or primary reason you use cannabis. I can point to a direct correlation with the opioid epidemic. No one knew they were as horrible as they are, and doctors were prescribing them left and right, and everyone thought it was okay. People think these cannabis products are okay because they’re on the shelf in every licensed dispensary, and the California Department of Health and the Department of Health in every other state and country has been involved to some degree. So, consumers think that they’re safe. The problem is they’re likely not just like we weren’t with opioids.
I don’t think the consumer demand will be there for quite some time until we start seeing a lot of long-term health impacts where we start seeing people getting lung disease, we start seeing people getting iron lung, different potential brain issues from inhaling adhesives and heavy metals. I think once the health impacts are seen clinically – just like we saw with the opioid crisis – once that was really in the forefront, everybody saw with their own eyes, and then they were aware that there was a problem. So, I think that it’s important to become aware of the potential health impacts, but I think it will take quite some time before that happens.
Green: It sounds to me like you want to get ahead of the industry on this because if it does go federally legal, there will be more stringent requirements. How do you think about that from a product design and development perspective to get ahead of a problem that exists but isn’t reflected in current regulations?
Mangold: The best thing we can do right now in the cannabis vape industry is to look at what the nicotine vape industry is doing. It is controlled by the FDA and there are standards for vaporizers in other parts of the world that are very stringent, like the AFNOR standards, which are in the European Union regulations for vaporizer safety.
What we do is we find the most stringent standards in the world, and we test our products to those standards. If the standards get stricter, we can develop our products and re-engineer them to meet those new requirements. Right now, all our products are emissions tested at AFNOR standards and over-engineered even for those standards. We also are constantly working on reduction of potentially hazardous materials: reductions of heavy metals; only using proven safe and effective materials and FDA approved materials like SAE 316L surgical stainless steel; and using improved ceramics that are not as brittle as the ceramics being used by almost every single manufacturer out there. There’s a lot of things that can be done. It takes supply chain management, understanding the technology and having strong solid teams of scientists and doctors that know this stuff much better than anyone else in the industry does, and leveraging their expertise.
Green: You recently launched a safety feature for minors. Can you tell me more about that?
Mangold: Yes. Two weeks ago, we launched a new software application called PurGuard. PurGuard is a massive innovation and is the first of its kind that we’re aware of. It’s a piece of software that pairs with any device, whether it’s a disposable pod system or a 510 cartridge. You then pair it to your phone and take a picture of your government ID. Then the camera looks at your face, runs quick facial recognition and runs an age check through the largest age-checking platform API in the world. Then based on location and legal age of the user’s location – some states are 18 and different countries have different rules – it validates your ability in your market to be consuming that product. This technology works in 180 different countries.
Once that occurs and the device is ready for you to use, we have another feature that we’ve developed. There is an auto-lock feature that we have where if you’re a parent, like me, and you have kids in the house, you can turn your device to auto-lock right from your phone. When you walk away from your phone and are 10 feet away, your Bluetooth connection will break, and it will automatically lock the device and so your child can’t walk into your bedroom and take your device.
This technology is important to us. Consuming cannabis is horrible for the health of minors. There are serious mental effects on brain growth that occur from using cannabis at a young age because the brain is still developing up until about the age of 23 to 25. So, it’s not safe for them to be using. Of course, I’m sure we all smoked when we were in high school, but the ease of use of vape and the discretion, I think allows minors to use significantly more cannabis than previous generations did 20, 30, 40 years ago. It’s a massive problem right now and I think it’s just a matter of time before the FDA requires such protections. This industry can only survive if we protect minors. So, we’re getting ahead of the curve and setting the standard.
Green: What kind of hardware does PurGuard work with?
Mangold: PurGuard works with every single type of device that we manufacture: 510 thread cartridges, disposables, and pods. If it’s a 510-thread cartridge, the battery has to be a PurTec battery, and the cartridge has to be a PurTec cartridge. They communicate to each other through certain technologies, and it can even recognize what oils are in the cartridge or the pod or the disposable. Moreover, we can tell what strain it is, when it was manufactured, what the potency levels are and more. It records all the usage statistics. We’ve also proven with our hardware, the actual milligram contents being consumed per hit, or draw based on volume, and draw duration. We can track and report to people and say, “Hey, you’re consuming 100 milligrams of THC a day, that’s too high, you need to slow down and maybe go down to 50 milligrams a day.” That will be what is required as it is being required in the nicotine industry under the FDA pre-market tobacco applications (PMTA). When the FDA comes into cannabis, they’re going to want to see the same thing. They’re going to want to know that cannabis products are not promoting people to use more, and they are trying to get people to use less. It doesn’t mean stop using it, but use it in moderation, like everything in life. You shouldn’t be drinking a bottle of whiskey a day. You probably shouldn’t be smoking a pound of weed a day either. Everything in life is moderation and this application not only protects minors but also teaches us about our consumption habits.
Green: A theme here is “skating where the puck is going to be.” What kind of trends are you looking at right now in the industry?
Mangold: The biggest trend I see right now in the industry is disposables. We’ve seen that the trends in cannabis consumption trail behind the nicotine industry by 2-4 years. We see a lot of our customers and potential customers shifting into disposables and are now seeing a very large spike in sales of disposables. I think that’s a big trend, but with that comes another major issue: we now have lithium-ion batteries being thrown away at astonishing rates and going into landfills. PurTec has an answer for that that we’ll be launching here in the next four to six months That will be I think the biggest innovation in regards to eco-friendliness within the vape industry. That’s where I see things going right now.
Green: What are you most interested in learning about?
Mangold: The thing that interests me most, and what I’m most interested in learning about is regulations. Not the regulations themselves, but how regulations are drafted. I’ve sat in several meetings with rules committees for different regulatory bodies throughout the United States and it is laughable. I was recently in a state I’m not going to mention. I asked them what scientists and what doctors they have consulted with and they said none. I just found that dumbfounding. The state regulatory bodies are making decisions without doing due diligence and without bringing in subject matter experts in some cases.
I’m very interested in learning about how we can change our regulatory bodies. Taxpayers pay these salaries and their job at the end of the day is to protect consumers. I think that these cannabis regulatory bodies need to be way more involved with their state’s Department of Health, as well as with the FDA, and National Institute of Health and looking at this as a holistic approach. How do we protect consumers? This is a drug. It’s like anything else out there. If you’re selling tomatoes that were sprayed with a certain pesticide, you must do the research and you have to know what’s in that product before you start putting it in people’s hands. Otherwise, you may have people dying left and right. So, I’m very interested in learning more about regulatory bodies and how they need to evolve and hopefully I can help push them into evolving sooner rather than later.
Green: Great, that concludes the interview, Corey.
Russell is the CEO of NES Technology Holdings, a technology development and marketing company that operates Vapor Distilled and LifeTonic Brands. NES Technology Holdings has invented a technology portfolio of more than 160 granted and pending patents that cover inventions across several high-value industries, including cannabis, beverage, fragrance and nutraceuticals. The company is currently in license acquisition diligence processes with 7 of world’s 10 largest fragrance companies and has received a joint venture offer from a $3 billion fragrance company to produce perfumes with its extraction technology. It is also launching ionized cannabis beverage products that provide effects as quickly as alcohol in Nevada and Colorado this fall.
Vapor Distilled invented and commercialized an evaporative extraction process with 40 international patents granted and pending that, along with CO2 extraction, is one of only two fundamentally new extraction processes invented in the last 50 years. Instead of using solvents or hydrocarbons to extract oils from plants, evaporative extraction directly evaporates essential oils from plants and condenses the evaporated compounds into an extract. The process takes less than two seconds to complete and extracts higher levels of volatile terpenes than existing extraction methods. Vapor Distilled has built a fleet of commercial-scale extraction machines and has supplied some of the cannabis industry’s largest brands. The company is currently licensing its evaporative extraction technology within the perfume industry and is marketing an aroma hop extract to replace the dry hopping step when making beer.
LifeTonic invented a drug delivery technology with 56 patents pending and granted, that turns oil-based plant compounds like CBD and THC into electrically charged cannabinoid ions that dissolve completely in water without emulsifiers or additives. When cannabinoids are ionized, absorption is significantly enhanced and their effects can be felt in minutes. The effects of a LifeTonic ionized CBD beverage can be felt by most people in less than 5 minutes, whereas the effects of a LifeTonic ionized THC beverage can be felt by most people in less than 8 minutes. For reference, typical onset times for cannabis beverages are 30 minutes or longer. LifeTonic beverage technology will allow cannabis beverages to work as quickly as alcohol, enabling cannabis to become a social drink.
Russell Thomas, CEO of Vapor Distilled and LifeTonic
We spoke with Russell Thomas, CEO of Vapor Distilled and LifeTonic about his cannabinoid evaporation process and rapid onset beverage technologies. Thomas is a career entrepreneur and inventor with 21 years of experience inventing and protecting intellectual property. Russell’s team has generated more than 160 granted and pending patents. Prior to entering the cannabis industry, Thomas worked in the cleantech industry.
Aaron Green: How did you get involved in the cannabis industry?
Russell Thomas: I came to the cannabis industry from the cleantech industry where I worked on technologies that improved the fuel economy of vehicles. I saw opportunities in the cannabis industry to improve cannabis extraction, which was one of the most important supply chain verticals in cannabis. Every product, from edibles to beverages and vape products, requires a cannabis extract. Any product that needs to be accurately dosed requires an extract. The old way of making edible products with cannabis butter was simply not viable as the industry matured, and most people were rapidly moving away from smoking cannabis and embracing vape products. Even with the entire industry almost completely dependent on extraction, no fundamental innovation was occurring. The primary ways that cannabis was being extracted were chemically intensive. The cleaner methods, such as CO2 extraction, were slow and expensive for terpene recovery. I saw this as a great opportunity to provide a better solution within a primary funnel of the cannabis supply chain.
We commercialized an extraction technology that evaporates cannabinoids directly from plant material in the form of vapor, and then recondenses that vapor back into an essential oil. The entire process takes less than two seconds to complete and preserves fragile terpenes. That technology, called Evaporative Extraction, is the foundation of Vapor Distilled.
Green: What timeframe was that roughly?
Thomas: We capitalized our company in 2015 and began selling wholesale extracts in 2017.
Green: Can you talk more about the evaporative extraction process?
Thomas: Our process works in a similar way to a cannabis vaporizer, but on a massive scale. Our extract is literally recondensed cannabis vapor. In one step, we extract, refine, and activate cannabinoids. On one end, plant material goes in the machine, and on the other end, extract and depleted plant material comes out. Our total extraction time is less than two seconds if you measure the time from when the plant material goes into the extractor and when the extract is condensed.
The LifeTonic logo
A continuous feed of dry plant material is introduced into a heated air stream. The air stream pneumatically conveys the plant material through a series of turbulent, heated evaporation chambers. Upon entering the evaporation chambers, volatile plant compounds are instantaneously distilled from the plant material. A centrifugal separator removes the depleted plant material from the air stream. The air stream is rapidly cooled, causing the volatile plant compounds to condense into an essential oil.
We achieve nearly total activation of THCA to THC simultaneously during extraction and, on average, we extract approximately two to four times more terpenes than a conventional extraction process. The cannabis industry is rampant with exaggeration about terpenes, but we are the only cannabis company negotiating a joint venture with a $3 billion fragrance company to produce perfumes, and I think that says a lot about our process.
Green: Is the extract coming out then as an oil?
Thomas: Our extract comes out of our machines as a fully-activated, high-terpene content, full spectrum oil. Unlike the THC crude that emerges from other processes, our extract requires no further distillation, activation or refinement. You can put it straight into a product.
Green: How about terpene recovery?
Thomas: This is by far what we do best. We excel with the recovery terpenes and volatile compounds from plant material. From day one, we noticed that our evaporative extraction process yields about two to four times more terpenes by mass compared to traditional extraction methods.
While we started as a cannabis company, we recently received a compelling joint venture offer from a $3 billion fragrance company to produce perfume products with our technology. We are also under NDA with 7 of the world’s 10 largest fragrance companies to complete diligence processes to license our extraction technology.
As part of our licensing diligence process, we are performing paid fragrance extraction research for three multi-billion-dollar fragrance companies. Our evaporative extracted fragrance extracts are presenting a broader and more complete range of volatile compounds compared reference samples. We are also seeing substantially improved yield of volatile fragrance compounds. Combined, this gives us the advantage of being able to produce more extract at a lower cost, while also producing a superior product. This combination is how licensees can take market share away from any fragrance company that does not have access to our technology, and it is why we are seeing so much rapid traction in this area.
We have also extracted hops with our technology. If you’ve ever smelled a traditional hops resin, it smells good, but the smell doesn’t fill the room. If you put just a drop of our hops extract on any surface, the entire room will smell strongly of a premium IPA beer. It’s so potent you don’t want to get it on your hands or clothes because you will smell like beer for hours. It’s powerful and wonderful stuff!
Green: What is your business model?
Thomas: At our core, we are a technology development and licensing company. We first identify what we believe to be critical verticals and bottlenecks in high-value industries, then we develop and patent highly differentiated and disruptive technology solutions that we believe exist nowhere else. We then demonstrate both market fit and viability at scale through proof-of-concept sales of branded and high-profile, white-labeled products produced with our unique technologies. Finally, we systematically license and exit the various portions our IP portfolio though the orchestration of highly competitive bidding processes that promote both defensive and strategic acquisitions of our technologies. We are currently at the final phase of our model with licensing our extraction technology, and we are receiving offers as part of a competitive bidding process.
Green: Okay, let’s change gears here and start talking more about LifeTonic and your cannabinoid ionization technology. Can you talk high level about the onset times of cannabinoids in different matrices and media?
Thomas: Through LifeTonic, we invented 56 international patents granted and pending cannabinoid ionization technology that compresses the normal onset time of cannabis beverages from 30 minutes down to just a few minutes. Our cannabinoid ionization technology can also be used as a rapid onset vape alternative when sold in a breath spray format. We are currently selling hemp-based versions of these products through LifeTonic.com, and we are bringing THC versions of these products to market in Nevada and Colorado this fall and winter under the brand name LifeTonic.
All conventional and even nano-emulsified cannabis edibles and beverages take a long time to work. A cannabis chocolate can take 45 minutes to two hours before the effects kick in. Cannabis gummies are faster, but it still takes half an hour to 45 minutes to feel the effects. The very best nano-emulsified cannabis beverages take about a half an hour to work on average, if you are lucky. That long of a time delay effectively eliminates the social aspect of consuming cannabis, so most people instead choose to vaporize or smoke cannabis.
If you look at the largest investments that have been made across cannabis, some of the most prominent have been made by alcohol companies. Constellation Brands invested nearly $4 billion into Canopy Growth, with a mission to find an alternative to alcohol in cannabis. Molson Coors has partnered with Hexo and AB InBev has partnered with Tilray, both with that same mission. Even after all this effort and investment, cannabis beverages represent just a sliver of the market because current cannabis-based beverages take too long to work. The fastest ones on the market, on average, take around a half hour to kick in.
Imagine going to a bar and knowing that every time you got a shot of tequila or a shot of whiskey it’s going to take thirty minutes or more for the effects to even begin to kick in. That would be terrible. That would be the end of social drinking. Unfortunately, that is how a conventional cannabis beverage works.
You can’t really get a social drinking experience with cannabis yet, so most people vape it because it’s fast. But a lot of people don’t want to smoke something; in fact, they don’t want to inhale at all. So, we saw beverages as a huge opportunity. How do we make cannabis beverages work as fast as alcohol? That’s what our ionization technology delivers. From all the people we’ve surveyed – hundreds of people – they say that they reliably feel an onset within about seven to eight minutes with our technology. That is just about as fast as a shot of tequila or whiskey.
“With our partners, we will be featuring LifeTonic beverage products on tap in a cannabis cocktail lounge right off the Las Vegas strip, where social consumption rules are welcoming.”What we’ve done is very different from available nanoemulsion technologies. All those technologies try to mix oil and water, and oil and water don’t mix. In a nanoemulsion, you mix cannabis, a carrier oil, an edible detergent and water, and then you run it all through an ultrasonic homogenizer that breaks the cannabinoids and oil into microscopic droplets suspended in water. There are a lot of styles of nanoemulsions, from spray-dried nanoemulsions to liquid liposomal encapsulations, and they all confer certain absorption benefits when compared to straight-up oil absorption. But still, even the microscopic oil droplets suspended in water are quite large compared to what we have done, and still take quite a long time to digest.
We looked at the cannabis molecule and we said, “You know what? If we can put a strong negative charge on it, if we can ionize it, then we can make it behave more like a dissolvable salt instead of an oil.” When we treat it this way, the cannabis molecule dissolves completely in the water without emulsifiers or additives. When something is dissolved, there is no nano-emulsion droplet size. It is single molecules dissolved water. A single ionized cannabinoid molecule is about 1,000 times smaller than an average nano-emulsion droplet – and this greatly enhances absorption. The onset speed of ionized cannabinoids compared to nanoemulsions is measurable as just a few minutes instead of a half hour or more.
We have 56 granted and pending patents on LifeTonic’s ionization technology. We can ionize THC, CBD, CBG and CBD – most cannabinoids are compatible. There are also several herbal products that are compatible with our ionization technology, like the curcuminoids in turmeric, which are normally very hard to get into water. We can also ionize the eugenol that is in cloves. Ionized eugenol is an intoxicant, so we have big plans for alcohol alternatives outside of cannabis.
We’re using this technology to enter the Nevada cannabis market with one of the largest dispensary chains and cannabis product manufacturers in Nevada. With our partners, we will be featuring LifeTonic beverage products on tap in a cannabis cocktail lounge right off the Las Vegas strip, where social consumption rules are welcoming. We’ll craft every kind of cocktail you can imagine, only without alcohol. All these beverages will work in a matter of minutes to provide the first true social drinking experience with cannabis. After you enjoy a beverage, you may purchase a package of ionized THC beverage powder sachets in the cannabis cocktail lounge or at any of the dispensaries within our distribution network. You can pour the powder into any beverage, and it becomes a friendly, fast-acting THC beverage that will get you high, but not leave you with a hangover. We will also be selling a breath-spray format that works almost as quickly as vaping.
Green: What kind of validation studies have you done?
Thomas: We have conducted several broad market studies for our ionized products and almost all people report a profound onset within a few minutes. We have not completed a formalized clinical trial, but we are closing a major funding round that will allow us to do so. We plan to begin controlled pre-clinical trials focused mainly on ionized CBD because it’s far easier to get FDA approval for clinical trials on CBD than for THC. Our studies will monitor a couple dozen volunteers with a functional MRI and watch the change in the brain using our oral spray and beverage products compared against a standard CBD tincture control. We know that we’re going to see fast action because everybody who uses it says that a feeling develops in minutes.
Green: What geographies are you active in and exploring?
Thomas: CBD and hemp products from our extraction technology have been sold in every US state and parts of Europe. Additionally, hemp-based CBD and CBG versions of our ionized products and ionized turmeric products have been sold in several states through our LifeTonic.com, our ecommerce site. We have also sold white labeled versions of our ionized products through partner brands. We will be launching THC versions of our ionized products with our partners Nevada this fall. We expect THC versions to also be available in Colorado this winter.
Green: So, you are creating the powders on site?
Thomas: Yes. We manufacture ionized CBD, CBG, eugenol and turmeric beverage powders on site. We also manufacture and fast acting ionized sprays. These products are sold through our own retail site and we white label for other brands. Per our long-term licensing strategy, these sales establish market viability through sales. Selling products and establishing market viability prior to licensing significantly increases the value of our licenses and exits. It’s very important to answer the question: Do people buy it and do people love it? So far, we like the feedback!
On the THC side, we manufacture ionized products through partners in each cannabis state that we enter. We manufacture the ionizing base here in Colorado, then we ship it to other states where our partners add the THC and package it in LifeTonic-branded packaging. The analogy is that we sell a proprietary Coca-Cola formula without the caffeine, then our partners add the caffeine and bottle it in Coca-Cola branded bottles. In this way, we ensure that the hardest part of our process is controlled house to ensure consistency and quality across all states. It also allows us to be a non-plant touching business, since we only sold upstream base products that did not contain THC. We pick the best manufacturing and distribution partner in each cannabis state and grow from there.
Green: What’s the one thing you’re most interested in learning about?
Thomas: Increasing the bioavailability of cannabis. I have been most passionate about making cannabis work as quickly as alcohol and giving people an alternative to inhaling it through smoking or vaping. That’s definitely what we’ve been most excited about as a company.
On September 14, the FDA published a consumer update on their website, seeking to educate the public and offer a public health warning on delta-8 tetrahydrocannabinol, otherwise known as delta-8 THC.
For the uninitiated, delta-8 THC is a cannabinoid that can be synthesized from cannabidiol (CBD) derived from hemp. It is an isomer of delta-9 THC, the more commonly known psychoactive cannabinoid found in cannabis. Delta-8 THC does produce psychoactive effects, though not quite as much as its better-known cousin, delta-9 THC.
Due to loopholes in federal and state laws, namely the 2018 Farm Bill specifying that hemp must contain less than 0.3% Delta-9 THC, delta-8 THC is technically legal across the country. It grew in popularity across the United States very quickly over the past year, largely due to online sales.
Following the surge in sales, a number of states including Colorado, Alaska, Arizona, Arkansas, Delaware, Idaho, Iowa, Mississippi, Montana, Rhode Island, Utah and Washington have implemented some form of regulation or outright ban on products containing delta-8 THC. Christopher Hudalla, president and chief scientific officer of ProVerde Laboratories, told Chemical & Engineering News that he has a lot of safety concerns about the whole delta-8 THC craze. Hudalla says he’s more concerned about the processing involved to produce it in large quantities. “These are pretty aggressive synthetic conditions that use strong acids,” Hudalla says. “They might be using strong bases to neutralize. They can use metal catalysts. I hear different people doing it different ways.”
The FDA’s consumer update included this picture at the top of the page
The FDA shares similar concerns. Their fourth point in the consumer update mentions that delta-8 THC products “often involve use of potentially harmful chemicals” in its production. They even claim that some manufacturers might be using unsafe household chemicals to synthesize delta-8 THC. “The final delta-8 THC product may have potentially harmful by-products (contaminants) due to the chemicals used in the process, and there is uncertainty with respect to other potential contaminants that may be present or produced depending on the composition of the starting raw material,” reads the FDA report.
In their consumer update, they note that between December 2020 and July 2021, they received 22 adverse event reports. Of the 22 reports, 14 were hospitalized following ingesting a delta-8 THC product. Notably, those reports included reactions consistent with symptoms from overconsumption of delta-9 THC, such as vomiting, hallucinations, trouble standing, and loss of consciousness.
The chemical structure of Delta 8 THC.
The FDA says that national poison control centers received 661 cases of delta-8 THC products, with 41% being unintentional exposure, 39% involved pediatric patients and 18% required hospitalization.
In the consumer update, they tell the public that delta-8 THC products have not been evaluated by the FDA and that they “may be marketed in ways that put the public health at risk.” This includes marketing it as a hemp product, which it is. Still though, many consumers associate hemp products with somewhat innocuous things, like CBD oil, which is mostly harmless.
The FDA also mentions in the update that delta-8 THC does have psychoactive and intoxicating effects. The FDA says they are notifying the public about the delta-8 THC due to an uptick in adverse event reports, marketing that is appealing to children and concerns regarding manufacturing with unsafe chemicals and contaminants.
Sleep health is a large and growing global market. According to Statista, the global market value of the sleep market was $432B in 2019 with an expected CAGR of 6.3% from 2019 to 2024. Supplements are a growing category of popular sleep health products with common ingredients including melatonin, valerian root, and more recently cannabinoids such as CBD and CBN.
RealSleep is a cannabinoid formulation company developing personalized products to improve sleep outcomes. RealSleep’s product strategy has been developed by top scientists and sleep experts, and clinically tested to aid individuals seeking to fall asleep faster, sleep deeper and cut down on sleep disturbances. Their studies have shown that 90% of people taking RealSleep have reported experiencing better sleep immediately
We spoke with Michael Kamins, co-founder and partner of OpenNest Labs and RealSleep, about RealSleep’s innovation in personalized formulations for better sleep. Kamins founded RealSleep as an incubated company under OpenNest Labs, where he is also a founding partner. Michael is the Chief Community Officer of the Wholistic Research and Education Foundation, and just led the world’s largest study on CBD and general health with Wholistic and Radicle Science, where he is also an advisor. Prior to RealSleep, Michael worked in tech where he was an early employee at Musical.ly (now TikTok) building brand partnerships.
Aaron Green: How did you get involved in the cannabis industry?
Michael Kamins, co-founder and partner of OpenNest Labs and RealSleep.
Michael Kamins: I got into the industry professionally about two and a half years ago, but my relationship with the plant goes back to high school. Prior to jumping into this space, I was working primarily in digital media. I was an early employee at Musical.ly, (eventually rebranded as TikTok), leading global music partnerships and growth. I helped grow that business by leveraging the social capital of music artists and celebrities and doing partnerships with record labels. At the end of 2018, I really saw the opportunity in the cannabis space. One of my best friends in Los Angeles, Dr. Jeff Chen, someone I did my MBA with at UCLA, became the founder and executive director of cannabis research at UCLA Medical. Seeing all the clinical research that he was doing and the objective health outcome data coming out of that research was really a huge inspiration to me. I saw a massive whitespace and opportunity to help build that bridge between the medical community and the cannabis marketplace. There’s been almost a century of cannabis prohibition setting back our scientific understanding of the plant. We know more about the rivers and plants in the Amazon than we do about the composition and compounds within the cannabis plant with regards to their wellness benefits.
I met my partners, Tyler Wakstein, Kris Bjornerud and Max Goldstein and we started a cannabis venture studio called OpenNest Labs, which is building out a diversified portfolio of cannabis consumer brands. We are focused on leveraging our collective experience at building ventures and communities and rallying those communities around a brand.
Over the last two and a half years, it’s been super exciting building brands that you see on shelves. We’re still in the early stages right now of building brand loyalty. A lot of cannabis consumers are still going into dispensaries and asking, “what is the cheapest product that I can buy with the highest potency?”
Green: Tell me about RealSleep, how did you come up with the idea and what is the basic concept for the end user?
Kamins: RealSleep comes from the passion that I had developed for medicinal aspects of the cannabis and hemp plant, thinking about not only THC and CBD – which are two major cannabinoids in the plant – but also thinking about the other 120 plus cannabinoids, each with their own unique properties.
It turns out that half the world’s population suffers from one poor night of sleep a week, and sleep issues lead to the highest rate of other comorbidities. We were thinking about the addressable sleep market, with ourselves being a part of that market, and wanting to build products that would help not only ourselves, but the countless other people around the world that suffer from poor sleep too, as it impacts their daily lives.
I’ve had issues with sleep myself. I have a genetic hearing condition called tinnitus. It’s a ringing in your ears that other people can experience environmentally from exposure to loud noises. I’ve had loud ringing in my ears my entire life even in quiet situations, like right before I go to sleep. I’ll often be lying in bed awake for an hour or two unable to sleep with the ringing. Everyone else on the team has had their own sleep issues and realized the profound negative impact of lack of sleep on other areas of health and wellness, whether it be next day energy or immunity.
We felt that by leveraging our access to the medical research community and even running clinical research on our own to validate the efficacy of the product relative to other products on the shelves, we could create a product that was safe and effective. We came across a clinical trial on insomnia and CBD by one of our research partners, the Wholistic Research and Education Foundation. What we saw from a lot of that anecdotal data was that CBD, and hemp in general, really helps to provide restful and restorative sleep.
CBD and CBN are two highly effective compounds for sleep and melatonin is by far the most widely researched and used over the counter sleep aid. We are sourcing clinical research on other ingredients such as valerian root, L-Theanine and GABA, and the list of ingredients goes on. We were interested in formulating a product that incorporates these safe and effective ingredients.
We noticed from our research and our access that sleep is as unique to an individual as their fingerprint. Take brainwave patterns when you are sleeping as an example. No one person’s patterns are the same. You could essentially identify an individual based on those patterns. One solution, or one product, is not going to help everyone. So, we worked with UCLA and the head of their laboratory of sleep and circadian medicine, a gentleman by the name of Dr. Chris Colwell, to understand the science of sleep. He is one of the most renowned sleep researchers in the world and is the head of our scientific advisory board for RealSleep. We’ve done clinical studies with over 900 people and 10,200 nights of sleep and used this data to develop a personalization engine in the form of a quiz that takes 90 seconds and allows us to map ingredients to specific answer selections. From these answers we deliver products that are customized to the individual consumer specific to their unique needs
We’re proud of the journey that we’ve gone on to understand the science and research behind sleep and to develop this personalization engine variations of products that work for each individual and their unique needs.
Green: Tell me how the questionnaire and personalization engine works. I understand the ingredient profile will change based on the customer’s responses?
Kamins: Sleep impacts an individual’s general health and wellness. For me, if I don’t sleep well, my next day is filled with anxiety, and that anxiety leads to worse sleep; it’s a vicious cycle. For other people, it could be a metabolic issue that leads to poor sleep or poor sleep that leads to weight issues. The list of other health issues and diseases linked to poor sleep goes on. So, while we’re looking at combating sleep to prevent other health issues down the road, one person who’s looking to get better sleep to improve one aspect of their life could be different from another person and the area of life they are looking to improve upon.
The quiz is essentially a combination of validated, reliable and flexible measures of patient reported outcomes. We use a combination of gold standard patient reported sleep questionnaires, one of which is called the Pittsburgh Sleep Quality Index, another being the RAND MOS scale, and others. We also work with our scientific advisory board and machine learning experts to advise us on customizing these questions with logic. We then use the responses to generate the appropriate formulations for our customers.
The questions cover everything from very specific questions on sleep, like sleep latency (the time it takes to get the bed) or sleep fragmentation (the number of times you wake up in the middle of the night) sleep duration, sleep quality, and then other areas of health that you’re looking to improve upon. Examples include metabolism, cardiovascular health, skin health, anxiety and stress. So, all these things factor into the different ingredients that we layer into the formulation.
Let’s say you don’t have a problem getting to sleep, but you wake up a lot of times in the middle of the night. Your formulation might be very different from someone who has trouble getting to sleep, but they don’t wake up in the middle of the night. Overall, one of our big goals with the formulation of all these products is that they increase your next day cognitive alertness by giving you that high sleep quality and restorative sleep. We don’t want to make anyone groggy the next day. Because overall, what you’re trying to achieve with sleep is you want to be ready to go the next day and be able to perform at your peak.
Green: So, you mentioned CBD, CBN and melatonin already as ingredients. Are there any other ingredients?
Kamins: Depending on what your answer selections are for the quiz, we will layer in L-Theanine, valerian root, Ashwagandha and even some of the other novel cannabinoids like CBC (cannabichromene). We have about 24 different ingredients that we can layer in, so it just depends. When you look at all the permutations and combinations of formulations and dosages, it’s in the trillions. From a supply chain standpoint, we’ve simplified it in a way that makes it very easy to funnel people into one of many predefined combinations of ingredients and dosage levels.
Our algorithm is an unstructured machine learning algorithm. The more people that take the quiz and the more people that provide feedback on their sleep score makes our programming and our personalization engine smarter.
Green: How does your manufacturing and packaging work?
Kamins: We have a strong relationship with a pharmaceutical partner that we have been growing even before RealSleep. It is a pharmaceutical manufacturing facility underneath a regional health care provider in the state of California. Everything they do is incredible. It’s a state-of-the-art facility and focused on complete transparency and building the products with the highest efficacy and safety profiles. They’re based in LA, and they’ve been such a pleasure to build our supply chain with.
Green: What kind of trends are you looking at in the formulation space?
Kamins: From a cannabinoid side, there’s been a bit more of a look towards some of the novel cannabinoids that have traditionally catered to a niche consumer base that is educated on cannabis. From being inside the industry, it’s very easy for me to talk about all the different cannabinoids, but a lot of people still don’t even know the difference between THC and CBD.
Our goal overall is to build efficacious products and educate people on all the different formulations and the different ingredients going in. Outside of cannabis, this year we’ve seen a large boom in consumer demand for Ashwagandha. There’s just so much hype around it in terms of how it impacts stress and energy and even libido, which is interesting. It’s probably the hottest non-cannabinoid ingredient that we’ve seen. Specific to sleep, the combination of L-Theanine and GABA and how they potentiate each other is impactful. Then there’s valerian root, which has been a big one over the last few years for sleep.
Green: Last question. What are you most interested in learning about?
Kamins: A personal interest of mine over the last few years is understanding from a scientific perspective, each of the cannabis compounds in greater detail. I think part of it is just really the curiosity to know the unknown. We’re at a point in the industry where there are still so many unknowns on the science-side of cannabinoids.
My passion for science has led me to support medical researchers in the space, so much so that I am an advisor and chief community officer to a nonprofit medical research organization called the Wholistic Research and Education Foundation, which to date has funded over six and a half million dollars in human clinical trials with cannabinoid rich therapeutics. One we’re currently conducting at UC San Diego is studying the impact of CBD on autism and other neurological conditions. That’s given me incredible exposure to research in the space. I am also a strategic advisor to a for profit medical research organization called Radicle Science, which is a very swiftly running clinical research for CBD and other cannabis brands in the space.
All in all, I’m driven by the possibilities that come with continuing to unlock the science behind the plant. By doing so, we can innovate products with efficacy and can educate people who are uninformed about the therapeutic benefits of cannabis, which will in turn benefit the industry and society. Striving for research breakthroughs and being transparent about our findings is going to help us destigmatize cannabis and legitimize the industry.
Green: That concludes the interview. Thanks, Michael!
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