Tag Archives: COVID-19

Buyer Beware For Distressed Cannabis Assets

By Joanne Molinaro, Geoffrey S. Goodman, Ronald Eppen
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The legalized cannabis industry remains a budding market in the United States. As the legislative dominoes started to cascade from state-to-state across the country, entrants of all categories—operators, investors, lenders, and retailers—were willing to stand in line for their tickets.  However, signs of fatigue, caused largely by the continuing murkiness of regulatory guidance and investors’ waning appetite for reading the legislative crystal ball, were already surfacing towards the end of 2018 and continued its slide downward into 2019. From March 2019, market capitalization for the 33 biggest cannabis stocks was down 45% by the end of 2019, falling from $54 billion to $30 billion and projected revenues dropped a whopping 17% as well.

Has COVID Made Things Worse?

Against this backdrop, COVID-19 arrived on the scene. Surprisingly (or perhaps not), cannabis seemed to be somewhat insulated from unprecedented disruptions to supply chains and artificial nose dives in demand. Many operators noted a sharp uptick in sales as states implemented shelter-in-place orders. Ironically, the supply chain hurdles created by the lack of federal legalization rendered operators—even multistate operators (MSOs)—uniquely equipped to handle the supply chain woes that others were struggling to contain. Meanwhile, as more and more states slapped the essential label onto both medical and adult use cannabis, operators were permitted to run business as usual (under the circumstances) and legalized cannabis started to look a little more “normal” in the most abnormal of times.

Thus, for a moment, cannabis looked like it might be a counter indicator (or recession-resilient)—while others were going down, cannabis was going up. But, after this brief surge, sales settled down and states began reporting decreases from this time last year and the outlook for the cannabis industry remains unclear.

Is This An Opportunity?

Declining demand, coupled with the issues described above, spells cash-flow problems for cannabis companies – many of which are still relative “infants” compared to their consumer goods counterparts and thus may have yet to create a “rainy day fund.” However, liquidity issues can create opportunities for those who still have cash to inject. In the last year, 13 special-purpose acquisition companies (SPACs) have listed on exchanges with an eye towards “cheap cannabis assets.”Cheap cannabis assets (or distressed cannabis assets) can offer a lowered barrier to entry into what many still believe to be a bull market. However, investors should proceed with caution. While the assets themselves may bear bargain basement price tags as the world grapples with the current recession, the cost of entry is more onerous than many realize. It is thus critical for potential investors to do their pre-due diligence on the who, what, when, where and how of acquiring distressed cannabis assets.

Where Do Distressed Cannabis Companies Go?

Ordinarily, distressed companies requiring capital restructuring look towards the US Bankruptcy Code. Deploying the broad injunctive relief afforded by the automatic stay as both a sword and shield, ailing companies can focus on lining up debtor-in-possession financing while they prospect feasible long-term exit strategies (through a reorganization, asset sale, or some combination of the two). The other major advantage of a chapter 11 is, of course, the “free and clear” order—the veritable clean slate provided by a federal court to good faith purchasers of the distressed assets that allow buyers to proceed with very few strings attached.

These federal benefits are not available to adult use and medical cannabis companies (hemp companies can file for chapter 11). Indeed, some bankruptcy courts have shut the door on not just the operators themselves, but companies that have even tangential dealings with cannabis companies.  With federal legalization, that will likely change; however in the meantime, distressed cannabis companies must look to pseudo-bankruptcy proceedings that offer some of the benefits that a federal bankruptcy can.

Is A State Receivership A Good Restructuring Vehicle For Distressed Cannabis Companies?

The number one option for many distressed cannabis companies will be state receivership. Much like a chapter 11 bankruptcy, the receivership provides for a stay against actions against the company’s assets, i.e., the breathing space it needs to hatch a plan for rehabilitation or exit the game as painlessly as possible. The receiver will be empowered to run the business while ironing out its operational/cash issues or conduct an orderly sale of the assets, usually through an auction process, during which the secured lender will be afforded the right to credit bid. The costs associated with that sale may be charged to the sale proceeds. Thus, in many ways, the state receivership acts like a federal bankruptcy.

How Is A State Receivership Different From A Federal Bankruptcy?

There are two main differences that investors should be aware of between a federal bankruptcy and a state receivership.

As with anything else that’s up for sale, where there’s a will, there’s a way.First, the court appointed receiver (often handpicked by the company’s primary secured lender) will be calling most of the shots from an operational, transactional, and financial perspective. That receiver may not have the kind of operational know-how of running a cannabis company that a typical debtor-in-possession might, making any major transaction more challenging. Even if the receiver has some background in the cannabis industry, he or she will still have a steep learning curve when it comes to the company’s specific business.

Second, the laws vary from state to state on whether a receiver can sell assets free and clear of any and all liens, claims, and encumbrances without the consent or satisfaction of those claims. Accordingly, buyers of distressed cannabis assets will want to take a close look at potential successor liability risks on a state-by-state basis.

Can Anyone Buy Or Invest In Distressed Cannabis Assets?

While many industries offer pay to play options for investors and lenders, the cannabis industry may not be as welcoming. Many lenders eyeing potentially lucrative refinancing possibilities that include an “equity kicker” (e.g., warrants) should be aware that states and municipalities often require investors aiming to own or control a substantial portion of the company’s business to satisfy most, if not all, of the regulatory requirements for holding the various licenses for operating in the cannabis space. For those interested in MSOs, a deep dive into each applicable state or city’s licensing requirements will be necessary.  Similarly, many states have onerous disclosure requirements for owners or financial interest holders of cannabis companies. Failures to disclose can lead to license suspensions or even forfeitures.

These are just some of the hurdles potential investors and lenders may need to scale. But as with anything else that’s up for sale, where there’s a will, there’s a way.

PJLA

Perry Johnson Laboratory Accreditation (PJLA) Pivots to Virtual Assessments

By Cannabis Industry Journal Staff
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PJLA

In a letter sent out to clients last week, Perry Johnson Laboratory Accreditation (PJLA) notified their partner labs that they will be conducting virtual assessments.

PJLA typically conducts assessments on-site. . However, given the current situation, with CDC recommendations for social distancing and mandatory stay-at-home orders in some states, the laboratory accreditation company is pivoting to virtual assessments to help their clients maintain accreditation.

Tracy Szerszen
Tracy Szerszen, president/operations manager, PJLA

Virtual assessments are not the norm, but they are allowed to offer them during crises where on-site assessments are not possible. PJLA is sending their clients virtual assessment surveys to check the viability of a remote assessment. That includes making sure there’s a video camera in the lab, capability to use remote meeting software, and capability for remote screen sharing during a quality review. Take a look at the letter PJLA sent their clients last week:

Dear PJLA Clients,

Considering the COVID-19 pandemic, business and the conduct of audits has changed dramatically.  We at PJLA are doing all we can to maintain accreditation while keeping the health and safety of our auditors, our clients, and their families a priority.

To keep your accreditation valid, we have been able to implement Virtual auditing technology to do entire audits – or at least parts of audits – remotely, using virtual audit techniques.  These types of audit are offered for crisis situations where we cannot perform routine on-site assessments (natural disasters, emergencies, travel restrictions).

Clients will be receiving a virtual assessment survey

  • Allowing for virtual (i.e. cameras in the lab)
  • Capability to use virtual systems
  • Having equipment with cameras/remote screen sharing for quality review and laboratory operations

Upon review of the survey, organizations and assessors will be provided with the decision that the assessment can be conducted fully or partially remote. Following approval, assessors and clients will have a discussion to determine the planning of the virtual assessment.

We have a team dedicated to providing support, but we still ask for your patience during this time.  It may take some time for everyone to become comfortable with the software. We will be reaching out to each client to hear about their experience to continually improve this process.

We thank you for participating in this new and exciting assessment option.

Respectfully,

Tracy Szerszen

President/Operations Manager

Perry Johnson Laboratory Accreditation, Inc.

755 West Big Beaver Road Suite 1325

Troy, MI 48084

Phone: (248) 519-2603

www. pjlabs.com

Cannabis Retailers Considered Essential: Safety Tips for Running Dispensaries During COVID19

By Aaron Green
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Dispensary sales in key US markets (CA, CO, WA, NV) remain up in Q1 2020 over Q1 2019, though the end of March saw sharp declines in sales according to a recent Marijuana Business Daily report. Massachusetts is also on track for record Q1 sales despite the closure of recreational stores, according to a recent BDS Analytics report.

budtenderpic
A bud tender helping customers at a dispensary

While it is still early to say what the impact of COVID-19 will be on dispensary sales into April, it is clear that the cannabis industry’s position as an ‘essential business’ is likely to help. States like Massachusetts are just allowing medical use businesses to remain open while states like California and Washington are allowing cultivators, producers and dispensaries to remain open. Meanwhile, according to Locate.AI’s analysis of retail traffic, the rest of the retail sector is down between 44% and 99% recently, depending on the category.

On March 24, the Washington State Liquor and Cannabis Board declared cannabis an essential industry including producers, processors and retailers. For dispensaries, they are now allowing curbside pick-ups for all adult customers. Colorado has gone further to restrict adult sales to curbside pick-ups only for recreational cannabis. Medical customers are still allowed to enter stores, but must practice social distancing. Across the states, dispensaries are offering curbside and in-store pick-up. In addition, at some dispensaries, delivery fees are being waived for larger purchases.

The International Chamber of Commerce recently published “Coronavirus Guidelines for Business,” summarizing actions businesses can take to reduce risks for operations and employees. Going further, The New England Complex Systems Institute (NECSI) recently published practical business safety guidelines detailing how these essential businesses can stay open and ensure safety. The guidelines, which are typically one to two pages and easily readable, are applicable to dispensaries. Certain suggestions, such as avoiding crowded spaces and maintaining 6ft distance will be familiar. Other suggestions go beyond common advice offering sensible recommendations to reduce risk of transmission as much as possible, such as the following:

Consider setting up one or more ‘necessities only’ sections that enable a short shopping trip for most of the customers. Setting up such short shopping areas outside when weather permits, or at remote locations, can dramatically reduce the shopping density inside the store.” or

Use floor markings or other visual system to indicate a one-way loop (with short cuts, but no back way) inside the store to promote a dominant walking direction and avoid customers crossing paths or crowding.

While many cannabis businesses have already gone beyond recommendations from the local health authorities, there are some that would still benefit from adopting the NECSI Guidelines to further protect their customers and employees. The guidelines are written for laypeople and are easy to print and share.

NECSI’s coronavirus guidelines can be found on the group’s volunteer website endcoronavirus.org.

endCoronavirus.org is a volunteer organization with over 6,000 members built and maintained by the New England Complex Systems Institute (NECSI) and its collaborators. The group specializes in networks, agent-based modeling, multi-scale analysis and complex systems and provides expert information on how to stop COVID-19.

The New England Complex Systems Institute (NECSI) is an independent academic research and educational institution with students, postdoctoral fellows and faculty. In addition to the in-house research team, NECSI has co-faculty, students and affiliates from MIT, Harvard, Brandeis and other universities nationally and internationally.

FDA Says No, CBD Does Not Cure COVID-19

By Aaron G. Biros
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Former NFL player Kyle Turley made headlines this week for some eye-catching remarks. The retired offensive lineman entered the cannabis industry in 2017, when he launched Neuro Armour (now called Neuro XPF), a brand of CBD products.

Turley and his Neuro XPF brand made claims in recent weeks, both on their website and in various social media posts on Facebook and Twitter, saying that their CBD products can cure COVID-19. Two quotes below, one from their website and one from a Facebook post, show how the company touted CBD as an effective medicine for treating COVID-19.

  • “Crush Corona . . . While scientists around the world are working 24/7 to develop a COVID-19 vaccine, it will take many more months of testing before it’s approved and available. However, there’s something you can do right now to strengthen your immune system. Take CBD . . . CBD can help keep your immune system at the stop of its game. . . . We want everyone to take CBD and take advantage of its potential to help prepare your body to fight a coronavirus infection. So, we’re making all of our products more affordable.”

  • “Crush Corona! Your best defense against the COVID-19 blitz starts with a strong immune system. It’s what protects your body from the everyday attacks of bacteria, viruses, parasites and a host of other nasties. Learn more here: https://neuroxpf.com/crush-corona/ FDAlogo

The U.S. Food & Drug Administration (FDA) got wind of these marketing tactics and sent Turley and his brand a warning letter. “FDA is taking urgent measures to protect consumers from certain products that, without approval or authorization by FDA, claim to mitigate, prevent, treat, diagnose, or cure COVID-19 in people,” reads the warning letter. “As described below, you sell products that are intended to mitigate, prevent, treat, diagnose, or cure COVID-19 in people. We request that you take immediate action to cease the sale of such unapproved and unauthorized products for the mitigation, prevention, treatment, diagnosis, or cure of COVID-19.”

Before entering the cannabis space, Turley was diagnosed with chronic traumatic encephalopathy (CTE) and then early onset Alzheimer’s as a result of sustaining head injuries while playing in the NFL. Turley has a reputation for being an outspoken cannabis activist, crediting cannabis with improving his quality of life and eliminating the need for prescription opiates.

In a tongue-and-cheek response to the FDA, Turley posted the following on twitter: “OK OK, YOURE ALL RIGHT, ILL ADMIT IT! CHEAP CBD BRAND PRODUCTS WILL NOT PREVENT OR CURE COVID19!” Turley, making light of the situation, inserted the term “cheap” in there, almost challenging the FDA and disregarding their warning letter.

However, the FDA is not joking when they send these warning letters. According to the letter, Turley and his company have 48 hours to remediate the situation or face a federal court injunction.

Cannabis Scientists and Labs Can Help with National COVID-19 Research Volunteer Database

By Aaron Green
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Harvard Neuroscientist, Michael Wells, and a team of volunteer scientists from endCoronavirus.org have created and stocked a national database of scientists and researchers ready, willing and able to help with response efforts for COVID-19. At the time of this writing, more than 8,000 scientists have registered from all 50+ states.

It all started with a Tweet on March 18th. 

“I really wanted an outlet for me, like someone like me, to be able to help out in this fight,” Wells said in a Harvard Crimson interview. “I knew I was, by far, not the only one who felt this way. And so what happened was, on the walk home from work that day from the lab, I thought, ‘Hey, I should try to organize something here in Boston so I could potentially be a part of a group that makes themselves available to health department officials or county officials.’”

Volunteers are made up of a mix of laboratory scientists, data scientists, software engineers, medical writers, CEOs and epidemiologists – from academic research institutes, national labs and private industry. Many state and local government agencies and organizations have already accessed the list for reference, including FEMA.

PCR testing is used in a wide variety of applications
Image: Peggy Greb, USDA

Members of the cannabis industry can help to combat COVID-19. “The cannabis industry relies on specialized laboratories that routinely perform qPCR-based microbial tests,” says Wells. “As a result, these labs have basic skill sets and facilities required to participate in community COVID-19 testing.” Quantitative Polymerase chain reaction (qPCR), is a common technique for determining if there are microbial contaminants in flower, concentrates and infused products.

Some cannabis industry leaders have already taken to the call. “With the trend in legalization, the cannabis industry has built an excess testing capacity in anticipation of an increase in volumes,” says David Winternheimer, PhD, CEO of Pacific Star Labs, a Los Angeles-based cannabis research organization with an ISO-accredited testing laboratory. “As an essential industry, cannabis companies are open to helping the wider population in a crisis like this, and testing could easily be adopted in labs with excess microbial testing capacity.”

Michael Wells and his band of volunteers are asking to help get the word out to other scientists who would like to sign-up at https://covid19sci.org and for anyone to help share the database link with any relevant person in government or health services. “Right now, it is all hands on deck. We need every lab, facility, and pair of skilled hands to be deployed in this fight against the most dangerous pathogen our species has experienced at this scale in our lifetimes.”

 

endCoronavirus.org is a volunteer organization with over 6,000 members built and maintained by the New England Complex Systems Institute (NECSI) and its collaborators. The group specializes in networks, agent-based modeling, multi-scale analysis and complex systems and provides expert information on how to stop COVID-19.

The COVID-19 National Scientist Volunteer Database is a database of over 8,000 scientists from all 50 states, DC, Puerto Rico, and Guam who are eager to volunteer our time, expertise, equipment, and consumables to help you respond to the COVID-19 crisis. They have aggregated our contact information, locations, and skills sets into this easy to use centralized database. Their members include experts in scientific testing, bioinformatics, and data management, as well as key contacts willing to donate lab space and testing supplies.

Soapbox

Home Office HACCP During COVID-19

By Nathan Libbey
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With much of the world shutting down and many of us forced to take refuge behind our own doors, we have some time to reflect on what actions led to this. There has been, in my opinion, a clear disconnect between our actions and health outcomes. We need to bridge this gap; We now have a moment to build that bridge. We can start by reassessing our endpoint measurement of health and disease and focusing on what leading measures will impact our lagging results. Think of it as HACCP-lite or home office HACCP. Small changes in the way we think and behave can lead to significant change.

Lagging measures – Lagging measures make great headlines and typically measure an outcome. These are easily quantifiable and therefore receive a good deal of the focus.

Leading measures – Leading measures are inputs that happen during the process and in advance of an outcome.  Leading measures are often difficult to quantify.

This week, Nathan started a “Germ Jar” activity with his kids to track washing.

We are currently focused on the lagging measures for a communicable disease, COVID-19. Illness and death numbers stemming from the pandemic continue to rise, as is expected with more available testing. It is easy for us to dwell on these numbers as they climb and dominate the news. A study in Australia last decade indicated that just over 1% of those experiencing flu like symptoms sought treatment and eventually got tested. I’m not going to use the tip of the iceberg cliché, but there it is. Focusing on the rapidly rising rates of COVID may be easy to do, but it won’t help our future selves.

What we should be doing during this time, however, is looking at our own leading behaviors and how changing them can help prevent this situation from reoccurring.

Here are some inputs we can rethink:

  • Hand washing – The average American uses the restroom 6-7 times per day. This week I started a “Germ Jar” activity with my kids (spring break week!) to track washing. If we wash our hands every time we use the restroom and every time we eat, that’s roughly 10X per day. Our leading indicator of household health, then, is 10 hand washes per day. This principle can, and should be applied to workplaces, including schools, airports and hospitals. What if we had mandatory handwashing prior to airport security and boarding? My estimation is that data would indicate a sharp decline in illness and transmission rates.
  • Disinfecting/Sanitizing – Similar to hand washing, cleaning surfaces serves as a vital indicator of future health. Examples, such as this District in Freeport, Il, indicate that increasing frequency of disinfecting can lead to a dramatic decrease in numbers sick. In my new office setting, we have set a goal via the Germ Jar of 3 times per day wiping down high touch surfaces. As we reenter close-proximity society, we need to have a better understanding of what high touch surfaces are, both for those who are tasked to clean them, as well as those that are doing the touching. Reduction of touches coupled with above washing behaviors post-touch can help prevent disease transmission.

    Nathan’s daughter adding to the Germ Jar
  • Monitoring – Lastly, we need to do a better job at monitoring ourselves and our environments. In my new office, we have enacted a temperature check every morning and night. If we practiced symptom reporting (coughing, sneezing, chills) and monitored temperature in other settings, such as offices and schools, could we start to see pockets of infection and trends? Taking it a step farther, while we invest a tremendous amount of time and money into protecting our food supply from foodborne illness, we rarely discuss preventive monitoring for other diseases, such as influenza and now COVID-19. Technologies are rapidly coming available that will allow us to perform quick diagnostics of both individuals and environments. If we were to monitor the air and surfaces of a school nurse’s office, would we find data that could prevent transmission of disease? Can we transfer HACCP-lite to additional (all) settings?

Over the next weeks and months, we are going to be inundated by the spike in COVID illnesses and deaths. During this time, it is on each of us to realize how our past behaviors led to the state we are in. When we return, viruses will not be absent from the world, our hospitals, schools, offices or our bodies. We can, starting now, begin to measure and change our leading behaviors and begin to shape a healthier future.

CARES Act – Stimulus Package Won’t Aid the Cannabis Industry

By Steve Levine, Megan Herr
3 Comments

On Wednesday, March 25, the United States Senate approved an estimated $2-trillion stimulus package in response to the economic impact of the COVID-19 outbreak. The legislation, formally known as the “Coronavirus Aid, Relief, and Economic Security Act” (or the CARES Act), was approved by the Senate 96-0 following days of negotiations. One of the most highly anticipated provisions of the CARES Act, the “recovery rebates” for individuals, will provide a one-time cash payment up to $1,200 per qualifying individual ($2,400 in the case of eligible individuals filing a joint return) plus an additional $500 for qualifying children (§6428.2020(a)). The CARES Act, which remains subject to House approval, also prescribes an additional $500 billon in corporate aid, $100 billion to health-care providers, $150 billion to state and local governments and $349 billion in small business loans in an effort to provide continued employment and stabilize the economy. The legislation further provides billions of dollars in debt relief on existing loans.

CARES Act – Paycheck Protection Program 

Under the CARES Act, small businesses who participate in the “Paycheck Protection Program” can receive loans to cover payroll expenses, group health care benefits, employee salaries, interest on mortgage obligations, rent, and utilities (§1102(F)(i)). To qualify for these small business loans, businesses must employ 500 employees or less, including all full-time and part-time employees (§1102(D)). Eligible recipients must also submit the following as part of their loan application: (i) documentation verifying the number of full-time equivalent employees on payroll and applicable pay rates; (ii) documentation verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments; and (iii) a certification that the documentation presented is true and the amounts requested will be used to retain employees and make necessary payments (§1106(e)). The CARES Act delegates authority to depository institutions, insured credit unions, institutions of the Farm Credit System and other lenders to provide loans under this program (§1109(b)). The Treasury Department will be tasked with establishing all interest rates, loan maturity dates, and all other necessary terms and conditions. Prior to issuing these loans, lenders will consider whether the business (i) was in operation as of February 15, 2020, (ii) had employees for whom the business paid salaries and payroll, or (iii) aid independent contractors as reported on a Form 1099-MISC (§1102(F)(ii)(II)).

What Does This Mean for Cannabis Businesses?

Due to the continued Schedule I status of cannabis (excluding hemp) under the Controlled Substances Act (CSA), cannabis businesses are not eligible to participate in the Paycheck Protection Program intended to keep “small businesses” afloat during the current economic crisis. Because federal law still prohibits banks from supporting marijuana businesses, financial institutions remain hesitant to service the industry, as anti-money laundering concerns and Bank Secrecy Act requirements (31 U.S.C. 5311 et seq.) are ever-present. As a result, even if cannabis businesses technically qualify to receive federal assistance under the Paycheck Protection Program, they will face an uphill battle in actually obtaining such loans.

Cannabis Businesses Are Also Precluded from “Disaster” Assistance

Moreover, the conflict between state and federal law continues to prevent cannabis business from receiving assistance from the U.S. Small Business Administration (SBA) under the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6201). In light of the COVID-19 outbreak, the SBA revised its “Disaster Loan” process to provide low-interest “Disaster Loans” to eligible small businesses. To qualify for these loans, a state must submit documented business losses for at least five businesses per county. The problem, however, is that the SBA still refuses to assist state-legal cannabis businesses in equal need of small business loans. Specifically, in a 2018 Policy Notice, the SBA reaffirmed that cannabis businesses – and even some non “plant-touching” firms who service the cannabis industry – cannot receive aid in the form of federally backed loans, as “financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity.” The 2018 Policy Notice clarified that the following business are ineligible to receive SBA loans:

(a) “Direct Marijuana Business” — a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to personal use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

 (b) “Indirect Marijuana Business” — a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to support the use, growth, enhancement or other development of marijuana. Examples include businesses that provide testing services, or sell grow lights or hydroponic equipment, to one or more Direct Marijuana Businesses. In addition, businesses that sell smoking devices, pipes, bongs, inhalants, or other products that may be used in connection with marijuana are ineligible if the products are primarily intended or designed for such use or if the business markets the products for such use.

More recently, the SBA provided further clarification that cannabis businesses are not entitled to receive a cut of the federal dollars being appropriated for disaster relief because of the CSA’s continued prohibition of the sale and distribution of cannabis. Last week, the SBA reiterated that:

“With the exception of businesses that produce or sell hemp and hemp-derived products [federally legalized under the 2018 Farm Bill], marijuana related businesses are not eligible for SBA-funded services.” (@SBAPacificNW)

Consequently, because of the continued Schedule I status of cannabis under federal law, cannabis businesses will not be entitled to receive Disaster Loans from the SBA, regardless of whether they qualify as a struggling small business.

Resolving the Issue

While the federal government has been considering legislation, such as SAFE Banking and the STATES Act, to create a more rational federal cannabis policy, neither of these bills are likely to pass any time soon given the current COVID-19 pandemic.

At the end of the day, until Congress passes some form of federal cannabis legalization, these small businesses will remain plagued by the inability to receive financial assistance, as evinced by the Paycheck Protection Program.

How Coronavirus is Affecting the International Cannabis Industry

By Marguerite Arnold
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Frankfurt: Germany right now is not the worst place to be as a global pandemic closes borders and leads predictably to mass change overnight, which is unparalleled during peacetime. But it is still eerie. Berlin and Cologne are starting to close public spaces (like restaurants, bars and clubs).

The grocery stores and pharmacies are still stocked and open however- it is a national priority.

On Germany’s borders, Europe is closing in a way it has not since WWII. The EU is considering banning all non EU “foreigners” from entering the region for nonessential reasons for the next 30 days – albeit in an environment where leaders are also concerned about making sure supplies get through to those who need them.

It also feels like wartime – only this time the “enemy” is a virus. It is called COVID-19, and it is spreading. It cannot be “stopped” although authorities are now doing everything they can to slow it down. At risk are not only populations but also vulnerable health care systems. The goal here is to prevent masses of sick people showing up at hospital. There will not be enough space for everyone if the rapid spread of the virus is not stopped, starting with beds and ventilators. In Italy, doctors are already triaging patients (deciding, in an overwhelming influx of sick patients, who has a chance of living and who does not), because there is a shortage of staff, beds and medical devices for those who need the most care.

The German government, in particular, is clearly prioritizing slowing down the spread and mitigating the load on a system that is strong, but also vulnerable to this kind of existential overload. Jens Spahn, Germany’s health minister, sounded the alarm early about mass gatherings. The country’s Chancellor, Angela Merkel, has promised to throw “Germany’s arsenal” (funding) to help German organizations hit hardest.

But that is just one country. Italy is in lockdown, Spain is on its way this week, and many others are closing borders. In Switzerland, as of this weekend, the only shops that were open were pharmacies and grocery stores. To get in, you must wait in line outside, spaced 1 meter from other people, and use hand sanitizer as you enter.

These are not privations that any generation alive today remembers viscerally. The closest is stories, perhaps second or third hand, of what life was like here during wartime.

Both China and now Germany have sent medical supplies to Italy (the worst affected country in Europe so far), and a German company is on the front lines of producing a vaccine which is likely to be ready for human trials as of June.

What Is The Impact On The Cannabis Industry Specifically?

But how does all of this impact the global cannabis industry, especially as it is an industry still very much and by design, built on international imports? Throughout the world, including the United States, cannabis-related trade shows, expos and conferences are all being either cancelled or rescheduled to June at the earliest. President Trump also instituted a European travel ban, although this will not have much effect on the industry here, since Germany imports cannabis from Canada, not the U.S. for its medical market.

The connection to the industry from the threat of the virus itself is also on display. In Illinois, for example, some dispensaries are giving priority to their medical patients, shutting the doors to recreational customers. Just months after legalizing recreational sales, the state is now telling dispensaries to discourage crowds and prevent customers from lining up. That is not so far the case in Europe where cannabis is slowly being normalized into the regular pharmacy system. But pharmacies are also on the front lines of this epidemic – not only in that they serve front-line customers, but also deliver medicines to retirement homes.

German authorities have already suggested that they nationalize medical supply chains from Asia for vital medical supplies, including presumably vaccines and other medications as well as medical equipment, like ventilators.

Clinical trials, fast-tracked vaccine production and new drug approvals are evidence of how quickly governments can work to produce new treatment options. Countries still hampered by the slow pace of cannabis reform should look at how a global health crisis has allowed governments to bypass certain areas of red tape, untethered by high prices in developing supply chains. While cannabis reform is indeed not the same as a global pandemic, it has the ability to save lives regardless. That ability should be enough impetus for quick reform, much like actions taken by governments so far during this crisis. Not to mention the fact that many cannabis patients are also the demographic of who is most vulnerable in this epidemic – the chronically ill and the elderly.

The International Cannabis Business Is Built on Global Supply Chains

In the U.S. right now, there is a significant concern about sourcing of the vaping industry (the vast majority come from Asia). In Europe this is of course far less of an issue. The only vapes of medical designation produced here are made by German Storz and Bickel.

However, there are other considerations. Right now, more cannabis is being imported than grown in Germany legally, Europe’s still largest medical market. And so far, most of the cannabis here is coming in from Canada, Holland or Portugal although domestic production has now been seeded from Greece and Malta to countries further east. There is only one entity (the former Wayland in partnership with the German Demecan) who is now even certified to produce in Germany.

Wash your hands, limit social interaction and cancel large events. Stock markets around the globe are in free fall as investors fear the crisis will plunge the global economy into a recession. This obviously affects publicly traded companies, as well as companies looking for capital. Expect the larger cannabis companies to continue taking bigger hits on their stock price.

But while borders are being closed all over Europe to people, emergency medical supplies and the like will increasingly be given priority.

How countries begin to view cannabis in this kind of epidemic is another question. It is certainly a drug of last resort right now, highly expensive and in many cases going to the elderly and those in palliative care. For this reason alone, cannabis companies need to step up to the plate. This industry is being built to serve the chronically ill. In other words, those people who are already most vulnerable to this virus.

But how to do that? Dronabinol (manufactured in Germany) is no longer the only option now available. It was patented as a direct response to the AIDS crisis in the early 1980s. But in a country with other options now, this is also on the plate.

So what can cannabis companies do during this time of crisis? For starters, read the guidelines on how companies can do their part to mitigate the spread of disease. Wash your hands, limit social interaction and cancel large events. Consider using in-store pickup or delivery options, where legal. And use telecommunications platforms like Skype or other remote cloud solutions to manage your workforce remotely.

Cannabis companies ought to have the wherewithal to do their part in mitigating the spread of COVID-19. As the global pandemic continues to spread outside of China (the only place where new infections are now levelling off), it’s increasingly important to monitor the situation and take extra precautions to mitigate the spread.

Cannabis Industry Journal

Infused Products Virtual Conference Coming on March 31

By Cannabis Industry Journal Staff
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Cannabis Industry Journal

In the midst of a global pandemic with schools closing, businesses asking employees to work from home and events being canceled left and right, we have one event that will remain scheduled: The Infused Products Virtual Conference on March 31. The event is complimentary for attendees to register. Click here to sign up for this virtual conference.

On March 31, the event will begin with a presentation from the folks at Cresco Labs: Applying Food Science Principles to Cannabis Edibles. Marina Mincheva, Director of Manufacturing Quality Assurance and Stephanie Gorecki, Director of Food Sciences at Cresco Labs will deliver this talk. They will discuss what a research and development process looks like for creating cannabis-infused edible products, how to then commercialize those products and developing CPG products with input from marketing and quality.

Ellice Ogle, CEO & Founder of Tandem Food LLC, will deliver a talk on the importance of food safety culture in the cannabis space. Kathy Knutson, founder of Kathy Knutson Food Safety Consulting, will follow that talk with a discussion of GMPs, HACCP and how cannabis companies can apply preventive controls. The last presentation on the schedule is The New Canadian Edibles Market, where Steven Burton, Founder & CEO of Icicle Technologies, will discuss edibles regulations in Canada, a current state of affairs of the Canadian infused products market, as well as what US edibles companies can expect when it comes to new regulations.

To learn more about this virtual event, see the agenda and register to attend, visit the website here.

Coronavirus Guidelines for the Cannabis Industry

By Aaron Green
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The World Health Organization (WHO) recently recognized COVID-19, the disease caused by the coronavirus SARS-CoV-2, a pandemic. What can cannabis businesses do to help reduce transmission?

At the time of this writing, community transmission of COVID-19 has been observed in every continent except Antarctica. While China and South Korea are showing signs of containment, with negative disease growth rates, the rest of world is experiencing positive – and in some cases exponential – disease growth rates. Many companies in the cannabis industry are asking: what can we do to slow the spread of the virus and get ahead of the outbreak?

By adopting sensible policies, businesses play a key role in reducing disease transmission. On March 13, 2020, The International Chamber of Commerce (ICC), in collaboration with the WHO and New England Complex Systems Institute (NECSI), released Coronavirus Guidelines for Business, a summary of actions businesses can take to reduce immediate risks to employees and long-term risks to costs and profitability. The guidelines have since been delivered to more than 45 million businesses worldwide.

There are four sections to the guidelines:

  • General Recommendations
  • Meetings, Travel and Visitors
  • Workplaces
  • Retail and Hospitality

Specific recommendations relevant to the cannabis industry include working remotely where possible, avoiding unnecessary travel and keeping clear records of each day’s contacts. Where possible, a pick-up and drop-off service, home delivery or drive by services are recommended.

Businesses should be developing, readying and implementing business continuity plans based on the ICC guidelines. At this point, a conservative position would be to assume that if an outbreak has not been reported locally it is only a matter of time before local cases are reported. Specific actions businesses should take will depend on location, nature of the workplace and potential disruptiveness to operations.

The ICC and NECSI Coronavirus Guidelines for Business can be found here.

endCoronavirus.org is built and maintained by NECSI and its collaborators and specializes in networks, agent-based modeling, multi-scale analysis and complexity as it relates to COVID-19.

The International Chamber of Commerce (ICC) is the institutional representative of more than 45 million companies in over 100 countries. ICC’s core mission is to make business work for everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard setting, they promote international trade, responsible business conduct and a global outreach to regulation, in addition to providing market-leading dispute resolution services. Their members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce.

The New England Complex Systems Institute (NECSI) is an independent academic research and educational institution with students, postdoctoral fellows and faculty. In addition to the in-house research team, NECSI has co-faculty, students and affiliates from MIT, Harvard, Brandeis and other universities nationally and internationally.