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The Distressed Cannabis Business: An Alternative to Bankruptcy

By Paula Durham, Scott E. Evans
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Bankruptcy is Not an Option

Bankruptcy courts do not provide protection to cannabis and cannabis-related businesses.Bankruptcy can be a very helpful tool for a distressed business. Bankruptcy allows a business to stop collection actions, discharge certain debts, cancel unfavorable contracts and provides breathing room to restructure the business.

What if your cannabis operation is struggling or failing – file for bankruptcy, right? Not so fast. Despite cannabis being legalized or decriminalized for certain activities at the state level, it remains illegal at the federal level. Therefore, the bankruptcy court will not provide protection to cannabis and cannabis-related businesses (CRB).

Alternatives to Bankruptcy

A State Court receiver may be the best alternative when bankruptcy is not an option.Enter the state court receivership. Receivership is an equitable remedy that is often employed as an alternative to a bankruptcy proceeding. A receivership can address business insolvency or can be a temporary remedy during legal proceedings between disputing business partners, with control of the enterprise hanging in the balance.

In either scenario, the court appointed receiver takes control of the business and must assess the posture of the business and determine the best path forward. The receiver’s options run the gamut from operating the company as is, restructuring operations to maximize profit or closing shop and liquidating the business as a whole or in pieces. The receiver has a fiduciary responsibility to determine the option that best satisfies creditors, similar to duties required of a trustee in a bankruptcy.

The importance of having a receiver well-versed in the cannabis industry cannot be overstated.Distressed cannabis companies are often prime candidates for receivership. Cannabis is a burgeoning industry with huge growth and profit potential. However, worlds have collided in the Green Rush, where business-minded individuals, often with little knowledge of cannabis, have partnered with individuals well-versed in cannabis culture, cultivation and consumption, but with little experience operating a business. Add a dash of complex state laws and regulatory drama in the form of the federal/state divide on legality, a dollop of fraud potential due to the largely all-cash nature of the business and you’ve created the perfect recipe for insolvency, litigation or both. In these often-chaotic conditions it is easy for a cannabis company to become unprofitable. A receiver can add significant value by stabilizing the business while the litigation proceeds or while developing a restructuring plan. In either case the goal of a receivership is to maximize the value of a business for the benefit of its stakeholders.

If you are considering restructuring options for your cannabis operation, a receivership can be an excellent choice. However, a cannabis receivership is not for the faint of heart. There are two significant areas that distinguish cannabis receiverships from receiverships involving non-cannabis businesses: First, the complex regulatory environment and second, banking. The importance of having a receiver well-versed in the cannabis industry cannot be overstated. Making a mistake in these areas can cause more harm than good. 

Complex Regulatory Environment

Cannabis operations are subject to a complicated regulatory framework that varies by state as well as by type of legalization (medical versus adult use cannabis). Receivers unfamiliar with the cannabis industry and the associated regulatory framework will be behind the curve on day one.

Upon appointment over a cannabis entity a receiver becomes responsible for the regulatory posture of that entity.Regulatory hurdles begin at the outset of a receivership. Although receivership is an excellent restructuring option for cannabis operators in distress, regulations surrounding the authorization requirements for those operating the business on a day-to-day basis (including receivers) vary by state. Some states, but not all, even have specific regulations for receiverships.

For example, the rules and regulations for cannabis operators in Colorado administered by the Colorado Marijuana Enforcement Division (MED) include provisions for receiverships. Specifically, the MED requires court appointees, including receivers, to register with the State Licensing Authority as Temporary Appointee[s] of the Court within seven days of appointment.

Similarly, Washington State cannabis regulations directly address receiverships. Specifically, Title 314 allows receivers or trustees to operate a licensed cannabis business, but the receiver must be qualified by the Washington State Liquor Control Board (LCB). Qualification requirements include  active status on the LCB preapproved receiver list or submission of an application to serve as a receiver for a licensee within two days of appointment. Furthermore, to serve as a receiver of a Washington state cannabis licensee the receiver must meet residency requirements.

Conversely, the Arizona cannabis laws and rules do not specifically address cannabis receiverships. Nevertheless, Arizona does require anyone volunteering or working at a medical or recreational cannabis dispensary to be registered with the Arizona Department of Health Services as either a Dispensary Agent (DA) or a Facility Agent (FA). Therefore, a receiver appointed over a licensed cannabis business in Arizona must obtain the applicable registration upon appointment in order to take control of the licensed entity in a compliant manner.

The fun doesn’t stop after the initial appointment hurdles are cleared. The regulatory environment across the country is a patchwork of complex laws. States that have legalized or decriminalized cannabis on some level have instituted often complex rules surrounding the cultivation, manufacture, wholesale and retail sale of cannabis. Even seemingly simple concepts such as the definition of cannabis are not so simple in some states. For example, Massachusetts includes cannabidiol (CBD) in its definition of cannabis while Arizona does not.

Some states, like California, do not allow the sale of cannabis licenses. Other states, like Colorado, allow for the transfer of commercial cannabis licenses. In a turnaround situation it is particularly important to understand the options available to liquidate a licensee’s assets.

Similarly, many, but not all states have rules requiring cannabis product testing by accredited laboratories prior to retail sale. Most states require THC potency testing, while others (like California and Colorado) also require testing for pesticides and toxins. Conversely, testing for toxins and contaminates is voluntary in Florida. Product testing is expensive and time-consuming, and operators must have a comprehensive system in place to ensure compliant product is available for sale to retail and wholesale customers.

Even taxes are different for cannabis businesses. A receiver must understand and be able to manage a cannabis business in order to comply with and minimize taxes under the infamous 280e regulations of the U.S. tax code.

Upon appointment over a cannabis entity a receiver becomes responsible for the regulatory posture of that entity. Accordingly, the receiver must ensure that any regulatory deficiencies are identified and corrected in order to ensure compliant operation.

We’ve highlighted just a few of the myriad of regulatory concerns facing a receiver upon appointment. It is critical to engage a receiver who has experience working under the complex cannabis regulatory structure for your distressed cannabis operation.

Banking

One of the most important things a receiver does upon appointment is to identify and secure the assets of the entity in receivership, including cash. This normally involves opening a bank account in the name of the receivership entity that is controlled solely by the receiver and moving cash assets into the controlled account.

This typically ordinary task is not so easy with a cannabis operation. Because cannabis remains illegal under federal law, processing funds derived from the sale of cannabis (even sales that are legal at the state level) can be considered by the Department of Justice (DOJ) as aiding and abetting criminal activity or money laundering.A receiver must negotiate the complex banking regulations regarding cannabis businesses and effectively manage the large amounts of cash, which may not be bankable.

The Financial Crimes Enforcement Network (FinCen) issued guidance in 2014 that cleared the way for financial institutions to service canna-businesses (2014 Guidance). The 2014 Guidance requires financial institutions who choose to provide services to CRBs to design and implement a thorough customer due diligence review that includes, in part, analyzing the licensing of the entity, developing an understanding of the business operations of the entity, and ongoing monitoring of the entity. In addition, financial institutions are required to file a Suspicious Activity Report (SAR) for every transaction they process for a CRB, should they choose to accept the business.

While this is a positive step forward, it is a heavy compliance burden that comes at a cost. Naturally, compliance costs incurred by banks to service cannabis operators are passed on to the customer; fees of $2,500 per month per account are not uncommon. The high compliance costs, coupled with the significant regulatory risk, keeps most banks out of the cannabis market; thus, making it hard, but not impossible, for a receiver appointed over a cannabis operation or CRB to obtain banking.

While banking options do exist, the reality is that most canna-businesses operate on a cash basis. Distressed cannabis operations may not have the cashflow to afford banking services, at least at the outset of a receivership. Further compounding the banking problem, some banks that are open to cannabis are not open to receiverships, further limiting banking options.

A receiver therefore must be prepared to quickly secure all cash assets of the receivership entity and ensure appropriate internal controls are in place to control cash on an ongoing basis.

Cannabis has been legalized or decriminalized in a majority of U.S. states but remains illegal at the federal level. Therefore, federal bankruptcy protection is not generally an option available for a distressed canna business. However, not all is lost because state receiverships offer an excellent restructuring option for distressed cannabis operations.

Minnesota Legalizes Adult Use Cannabis: Part 2

By Abraham Finberg, Rachel Wright, Simon Menkes
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In Part 1, we examined the current status of adult use cannabis in Minnesota, paying particular attention to the licensing framework, taxation and social equity considerations. In this article, we’ll cover some important need-to-know info if you’re considering opening an adult use business in the “Land of 10,000 Lakes.”

Starting a Cannabis Business in Minnesota: Important Considerations

As the state does not expect to begin issuing licenses before the first quarter of 2025, now is the time to plan a licensing campaign. With a population of 5,714,000, 64% of which live in the Twin Cities of Minneapolis-Saint Paul, Minnesota is close in population to Colorado, with 5,774,000 residents. Colorado currently has around $1.8 billion in yearly retail cannabis sales. This may suggest a similar possible level of sales for Minnesota once its retail cannabis market matures.

In a recent op-ed piece for Marijuana Moment, the New York cannabis consulting firm of Bridge West Consulting suggested three reasons, in addition to low cannabis excise taxes and reasonable license fees, why entrepreneurs should consider investing in a retail cannabis business in Minnesota:

  • Minnesota legislation prohibits localities from banning cannabis businesses. This avoids serious problems that have plagued cannabis businesses in other states including California and Montana in which access for cannabis companies has been denied and, in Montana’s case, even reversed. (Minnesota’s new legislation does allow local governments to limit the number of cannabis retailers to one for every 12,500 residents, however.)
  • Minnesota has allocated funds to assist social equity cannabis businesses, including $6 million to the CanStartup which will fund non-profits to make loans to budding cannabis businesses.
  • Bridge West makes the interesting observation that Minnesota is bordered by four states—Wisconsin, Iowa, South Dakota and North Dakota—none of which have legalized adult use cannabis. Moreover, an estimated 1.9 million people live outside of Minnesota within a 50-mile radius. That means that not only will Minnesotans not have to compete with out-of-state cannabis dispensaries but will benefit from the purchases of out-of-state residents that live within a comfortable distance.

How a License Application is Scored

HF100 gives some guidance as to how the Office of Cannabis Management (OCM) will score license applications, awarding points for the following 9 categories: social equity status, veteran status, security and record keeping, employee training plan, business plan and financial situation, diversity plan, labor and employment practices, knowledge and experience and environmental plan.

The OCM may award additional points if the applicant would expand service to an underrepresented market. Points may also be awarded to those applicants who can demonstrate a negative impact from cannabis prohibition such as arrest or imprisonment of the applicant or their immediate family. This is different from social equity status and the law says points may be awarded to the applicants “in the same manner as points are awarded to social equity applicants.”

Emphasis on Market Stability; Prohibition of Vertical Integration

Minnesota is taking measures to ensure “market stability,” which it doesn’t specifically define, but which it says involves:

  1. Ensuring an adequate supply of cannabis, but not a glut.
  2. Eliminating the illicit cannabis market.
  3. Promoting a craft cannabis industry.
  4. Prioritizing growth and recovery in communities that have experienced a disproportionate, negative impact from cannabis prohibition.

HF100 states, “The office shall issue the necessary number of licenses in order to ensure the sufficient supply of cannabis flower and cannabinoid products to meet demand, provide market stability, and limit the sale of unregulated cannabis flower and cannabinoid products.”

Continuing its emphasis on “smaller is better,” HF100 says, “Unless the office determines that the issuance of bulk cultivator licenses is necessary to ensure a sufficient supply of cannabis flower and cannabinoid products, the office shall not issue a bulk cultivator license before July 1, 2028.”

Vertical integration is also prohibited. “The office shall not issue licenses to a single applicant that would result in the applicant being vertically integrated.” HF100 goes on to state that microbusinesses are exempted, and that if the OCM determines that vertical integration is necessary to ensure a sufficient supply of cannabis and cannabis products during the first year of such products being sold to customers, it may authorize one or more applicants to be vertically integrated. However, such a group of licenses are very temporary and will expire at the end of that first year period.

An entity holding a cannabis retailer license may also hold a delivery license, a medical retailer license and an event organizer license. But no retailer may hold any other license. Also, no entity may own or operate more than one retail business in one city or county.

Interestingly, Minnesota is also allowing cities or counties to own and operate a municipal cannabis store, possibly similar to the way Utah has government liquor stores which compete with private bars, breweries, wineries and distilleries.

In Summary

Minnesota is just beginning to define and establish its adult use cannabis market. Like other states before it, it is attempting to promote social equity aims at the same time as it’s working to avoid the serious problems of a competitive illegal market and an over-or-under supply of cannabis to its citizens.

With low license fees and excise taxes and a good-sized population, 420CPA believes cannabis entrepreneurs should seriously consider Minnesota for possible investment. The first cannabis retail businesses are not expected to open for another 18 months, so now is the time for businesspeople to lay the groundwork for their applications and future locations.

Digital Insurance Solutions are Ripe for Fast-Growing Cannabis Dispensaries

By Jay Virdi
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Cannabis sales in the United States are expected to hit $100 billion by 2030, and yet dispensary owners still face hurdles before getting up and running, namely obtaining the right insurance coverage. Unlike a coffee shop or clothing store, it can be difficult to secure the insurance coverage needed to satisfy the requirements prescribed by the state and/or commercial leasing agreements.

Yet a simple answer to the dilemma exists. Increasing demand for cannabis business owner policies has prompted some retail insurance brokers to provide convenient turnkey solutions via digital commercial insurance platforms. These platforms circumvent the traditional underwriting process that could trudge on for weeks, allowing cannabis businesses to ramp up operations sooner.

Currently about 30% of insurance customers interact with and purchase from their insurance provider digitally for their business needs. This can be a game changer for a fast-growing cannabis business operator.

What do you need to obtain insurance online?

Obtaining insurance online lets dispensaries secure a complete, holistic insurance policy in one quick pass to cover the industry’s unique risks.

Increasing demand for cannabis policies has prompted some insurance brokers to offer digital solutions

Like any other commercial business package policy, you’ll need to provide details about your business and its operations when harnessing a digital insurance platform.

The first piece of information needed will be proof of licensing with the applicable state or commonwealth where the business operates. This piece is critical since cannabis is still illegal at the federal level. In addition, businesses will need to have other basic data on hand before finding coverage online, including:

  • The legal name of the business
  • Tax identification number
  • Operating locations
  • Annual or monthly sales projections
  • Number of employees

A Closer Look at Cannabis Coverages

Crime, extreme wealth conditions and legal challenges count among the risks faced by cannabis dispensaries. Here are three essential coverages important for cannabis business owners and operators.

  1. Commercial property insurance. Owned cannabis dispensary properties can face perils such as fire, storms, theft and vandalism. Buildings hold value and need to be repaired or replaced if any adverse events occur. Leased properties may contain equipment and fixtures owned by the business and subject to the very same hazards. Commercial property coverage can help cover the cost of replacing business contents and inventory if damaged through a peril covered by the policy.
  2. General liability insurance. Cannabis retail outlets experience a high volume of foot traffic from customers, vendors and technicians, for example. As such, trips, slips and falls could occur and lead to lawsuits. General liability insurance helps cover legal defense costs should any of these parties seek to recover compensatory damages from accidents and mishaps on the property or occurring elsewhere in a business-related capacity.
  3. Product liability coverage. Issues such as quality control with infused products and concentrates can be a concern for cannabis purveyors. Lawsuits arising from mislabeled or improperly tested products likewise need to be defended by cannabis businesses. Comprehensive product liability coverage can meet the needs of cannabis dispensaries promoting and selling a unique variety of product offerings.

Outside the standard commercial package offering, dispensaries can opt for coverage such as business interruption insurance, which helps pay overhead costs if the operation must temporarily cease due to a covered peril.

Cannabis businesses also often need to retain workers compensation insurance that helps pay for lost time and/or medical bills incurred by employees who become ill or injured on the job. Commercial crime policies help cover losses that may occur on premises or in transit in a cash-centric business.

If cannabis industry owners and managers use an online platform for their insurance needs, they could secure a certificate of insurance in as little as 24-48 hours. HUB’s digital commercial insurance platform, powered by Insureon, is one such direct-to-consumer solution. The platform is ideal for licensed retail cannabis dispensaries in all legal US states.

Minnesota Legalizes Adult Use Cannabis: Part 1

By Abraham Finberg, Rachel Wright, Simon Menkes
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Part 1: The Current Status of Legalization

Minnesota has long been known as the “Land of 10,000 Lakes” and boasts over 14,000 bodies of fresh water covering at least 10 acres. The Dakota Sioux word for water, “Minne”, appears in the word Minnesota (clear blue water) and many locations around the state, including Lake Minnetonka (big water), Minnehaha Falls (waterfall) and Minneapolis (water + the Greek word for city).

With all this emphasis on water, it’s no wonder Minnesota’s cannabis-lovers are wondering whether the state’s new adult use legislation will issue in a river of profits for both the state and its future adult-use cannabis businesses.

Overview

In May 2023, House Bill HF100 was passed by the legislature and signed into law by Governor Tim Walz on May 30, 2023, making Minnesota the 23rd state in the union to legalize adult use cannabis. Effective August 1, 2023, it will be legal to possess up to 2 pounds of flower (2 ounces in public), 8 grams of concentrate and 800 milligrams of infused edibles.

HF100 also established the Office of Cannabis Management (OCM), which will be responsible for overseeing the state’s adult-use program. Minnesota’s medical cannabis program, now under the auspices of the state’s Department of Health, will transition over to the OCM on March 1, 2025.

The OCM website makes clear that “the regulatory framework will take time to develop and will require input from communities throughout the state” and that “the legislation proposes that retail sales for adult use cannabis in Minnesota begin in the first quarter of 2025.”

Minnesota Licensing Framework

The legislation establishes sixteen licenses including ten adult use license types: microbusiness, mezzobusiness, cultivator, manufacturer, retailer, wholesaler, transporter, testing facility, event organizer and delivery service. There are also two hemp licenses and four medical cannabis licenses.

Adult use license fees are reasonable compared with other states with application fees from $500 to $10,000, initial license fees from $0 to $20,000 and annual renewal fees from $2,000 to $30,000.

The state also will give preference to social equity applicants and notes that “The legislation prioritizes applications for business licenses from people who live in low-income areas that have experienced a disproportionate impact from cannabis prohibition and for military veterans who lost honorable status due to a cannabis-related offense. Social equity includes people who were convicted of cannabis-related offenses before the effective date of the legislation.”

Taxation of Cannabis Sales

Tax on cannabis products will be limited to 10% in addition to the state sales tax of 6.875% and any local sales taxes which may already be in place. Local governments will not be allowed to collect an additional cannabis-specific tax. Additionally, medical cannabis sales will not be taxed at all. The combined adult-use cannabis excise tax of 16.875% gives Minnesota the fifth-lowest cannabis tax rate in the country, with only four other states—Michigan, Delaware, New Jersey and Maryland—offering marginally lower rates.

Cannabis tax revenue will be split 80% for the state’s general fund and 20% to local governments. These tax receipts will fund a wide range of programs including the Minnesota Department of Health’s prevention and education efforts (including for media campaigns), data collection and grants for local and Tribal public health departments to support education, technical assistance and outreach.

The Social Equity Factor

As with many other adult-use states, there is a strong social equity element in Minnesota’s legislation. The legislation calls for automatic expungement of low-level cannabis convictions and for creating a Cannabis Expungement Board, which will review felonies for expungement or resentencing.

The law also creates a Division of Social Equity within the OCM, which is charged with providing outreach and services to communities disproportionately affected by cannabis prohibition. HF100 states that “Status as a social equity applicant must account for at least 20 percent of the total available points.” This suggests a strong favoring of a social equity application but stops short of requiring a certain amount of social equity licenses be awarded at the beginning of the program, as has been the case in New York.

At this time, HF100 states that an individual qualifies as a social equity applicant if they’re:

  • a military veteran who lost honorable status due to a cannabis-related offense;
  • a resident for the last five years of [a] … neighborhood that experienced a disproportionately large amount of cannabis enforcement [as determined by the OCM]
  • a resident for the last five years of [a neighborhood] … where … the poverty rate was 20 percent or more; or … the median family income did not exceed 80 percent of statewide median family income.

To Recap

Minnesota just legalized adult-use cannabis with the passage of House Bill HF100 and is in the early stages of rolling out its program. The first adult-use sales aren’t expected to take place until the first quarter of 2025.

Just a cursory glance at the state’s adult-use cannabis program shows Minnesota is trying for a friendly, business-positive environment for new cannabis companies, especially considering its low excise tax and moderate licensing fees. As with most other adult-use states, the social equity factor will play an important part in the issuing of licenses and must be taken into consideration.

We at 420CPA encourage cannabis entrepreneurs to examine Minnesota as a potential location for their future cannabis business. To that end, our Part 2 will dive more deeply into Minnesota adult-use with these topics:

  • Important information for those looking to start a cannabis business in Montana
  • How license applications will be scored
  • Other valuable information with which to weigh your decision.

Minnesota adult-use cannabis presents an exciting opportunity for cannabis entrepreneurs. 420CPA will help make that decision as easy as possible!

The Craft Cannabis Cavalry: A Story of Small Business & Economic Empowerment

By Aaron G. Biros
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The Tohiyusdv Cavalry is a black-owned small business based in rural Virginia. At its core, they grow and process cannabis for CBD products, but it’s really much more than that. Through its Precision Craft Farmer Program, the company works with existing small minority-owned farms to introduce them to the cannabis market.

Via land leasing, profit-sharing, crop-sharing, facility design, community involvement and incubator-style support, Tohiyusdv Cavalry has built a network of farmers and a community around them that work together to gain access to the larger cannabis market.

Tohiyusdv, pronounced “toe-hee-yoos-da,” means “calm” and comes from a Native American dialect in the region. James Arrington III, founder of the company, is both African American and Native American, so the name is a nod to his roots. While Arrington insists he is just one part of this larger organization, it’s his passion for community, small business, social equity and cannabis that drives the company.

James C. Arrington III, founder of Tohiyusdv Cavalry

We sat down with James to learn more about the Tohiyusdv Cavalry, a bit of his background, how him and his community have found success and what they hope to achieve.

Different Sides of the Tracks

He grew up in Norfolk, Virginia alongside his two brothers and sister with a view of two different lifestyles. “We grew up in the hood of Huntersville, but I was raised in a white church, so it was interesting seeing both sides of the tracks and seeing the side that some of my friends couldn’t see,” says Arrington. The dichotomy of his upbringing gave him a unique perspective that he took to heart, eventually going to Old Dominion University for electrical engineering at the encouragement of a teacher.

Throughout his formative years, he didn’t really get involved with cannabis – that came much later. In his college years though, he met his Delta Chi fraternity brother Ernest Toney, who would go on to become the founder of BIPOCann, a nonprofit that helps social equity entrepreneurs, minority business owners and professionals in the cannabis industry.

Arrington with a recent indoor hemp crop

Working as an electrician to pay for tuition, Arrington graduated and launched what would become a successful career in electrical engineering. He worked as a subcontractor for the government in warzones, designing electrical systems with security and defense in mind, before starting his own company CalArr Consulting. “What really tied me to the industry was when I started using cannabis for my mental health and to understand who I am,” says Arrington. A combination of his upbringing and his career led to his PTSD, which then led him to cannabis as a tool for his wellbeing and mental health.

More recently, he spoke with Ernest Toney, who said, “Look man, I’ve seen what you’ve done with your business over the years and you should consider getting into the cannabis industry.” Arrington took that advice and ran with it. “So, the company I started is a mission-driven company based around healing, cannabis, understanding and helping people,” says Arrington. “Tohiyusdv Cavalry is based around working with small farmers and minorities; We introduce them to the cannabis industry.”

Here Comes the Cavalry

Right now, his company works with hemp and CBD products, but he says they are looking to expand into the THC market once Virginia legalizes and they already have some partners they’re working with in other states to expand the program.

Tohiyusdv Cavalry has been around for about two years now and Arrington says the heartbeat of it is their craft farmer program. “These are existing minority farmers in a community, already growing crops like soybean or corn,” says Arrington. “These are generational farms that have been passed down through family, some of them almost 100 years. They’ve always had to change with the times.” In changing with the times, a lot of these small, rural farms are seeing the hemp market as a possible pivot, but hardly know where to begin. “They are starting to hear about farmers in their community growing hemp, but having trouble finding folks to buy their crop.”

Some of the products from Tohiysudv Cavalry

That’s where the Cavalry comes in. “What you see in minority backgrounds is a lot of opportunities like this that are very scary to step into,” says Arrington. “We’re teaching people how to get into the industry, helping them through processing and getting on the market using new technology, and we do it at their pace.” Some folks in their network just want to rent space on their farm out to a hemp grower, others want to dive right in and create CBD products. They operate a white label program for some and help set up turnkey facilities complete with extraction and processing for others. “We work with them to build a community around their farm,” says Arrington. “We are just the engine behind these small farmers helping them get access to the larger market.”

From the Ground Up

A good example of the work they put in is Everbreeze Acres. Based in Rustburg, Virginia, Everbreeze is a 434-acre farm and bakery that’s been in the same family for generations. They had an interest in the cannabis market, so they approached Tohiyusdv Cavalry. James and his crew came in and built a 2,000-square-foot facility that is hydroponic, fully turnkey and automated. “We are teaching them the process and turning it over to them,” says Arrington. “We are teaching them how to take care of the plants, grow the crop, harvest and process it, all while collecting data.”

Everbreeze Acres

Before brainstorming how they want to market their products and how they want to be represented, the owners of the farm were still a little skeptical. Being in their 70s, they wanted to make a product that has some medicinal properties and could help people take care of themselves. So, James and his team put together a plan to launch a daily supplement, akin to a multivitamin.

Now Everbreeze Acres is using CBD as a megaphone to communicate their story. They were wary at first, but learned about it, grew to like it and now run a fruitful cannabis business. “We have their facility up and running and we’re growing several strains that work best for them right now,” says Arrington. “We’re about a month away from another harvest there.”

Building Community

Everbreeze Acres embodies the concept of the Tohiyusdv Cavalry. Helping small farmers establish themselves in the cannabis industry, building community around them and working to help their following and their mission.

A Tohiyudv Cavalry cultivation facility

Small business is the keystone of many communities, the cannabis industry included. Economic empowerment is sort of a way of staving off big business too. Given the history of big tobacco in the Virginia area, many stakeholders are worried if they’ll still have a seat at the table when Virginia legalizes adult use cannabis. “Looking at it in that sense, we are hoping that creating this group of diverse minds and backgrounds is building a table where everyone can sit at,” says Arrington. “We want to provide that place for them and let them know that, yes, this is the room for you, this is the place for you. We’re lending a helping hand and giving them a voice and a megaphone, sharing what they want to see in this industry.”

When asked what advice James would give himself ten years ago, the mood was somber. “Ten years ago, my mentor, alumni Dave “BamBam” Hoffman died. I would say that was the thing that gave me that kick in the ass, that I wasn’t doing everything I could do.” He has the same advice for minorities and indigenous people getting into the industry now: “Don’t be afraid to do it, the skills that you have you can put into the industry in some way. Your fit is out there. If it’s the right way, it’s never going to be easy. Push through it, keep going,” he says.

Growing in Virginia

Tohiyusdv Cavalry is ready for the day that Virginia legalizes adult use cannabis, but James says he hopes they make room for the small farmers. “Small farmers are what makes Virginia, Virginia.” They are in talks with some larger medical cannabis companies about creating similar programs for sourcing from craft growers. Through their strategic partners, a big part of their work right now is around partner and sponsor outreach, getting more businesses interested in sponsoring facilities and investing with small farmers. “Our hope is that we’ll be able to keep expanding the program and involve more minority farmers in Virginia and that it will only keep growing,” he says. “We’re optimistic that we’ll have three more farms signing on this year. And hopefully when Virginia legalizes adult use cannabis soon, we’ll be ready to expand in that market and keep on growing.”

Desperate California Cannabis Vendors Seek Credit Protection

By Abraham Finberg, Rachel Wright, Simon Menkes
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Cannabis companies representing 45% of California’s cannabis sales are pushing a bill that will crack down on non-paying customers. Well known operators, including Kiva, Lowell Farms, Nabis and Sunderstorm, recently formed Financial Stability for California Cannabis (FSCC) and moved to support Assembly Bill 766.”

The bill, nicknamed “The Cannabis Credit Protection Act,” would require a cannabis licensee to pay for goods and services sold or transferred by another licensee no later than 15 days following the final date set forth in the invoice. If full payment is not received by that date, the seller would be required to report this to the Department of Cannabis Control (DCC), which in turn would notify the delinquent buyer and begin disciplinary proceedings. The buyer would be prohibited from purchasing any other cannabis products on credit until the delinquent invoice was paid. In addition, the DCC would be empowered to issue a penalty (unspecified), taking into account “the frequency and gravity of the licensee’s [past] failure to pay outstanding invoices”.

In a letter of support for AB 766, the FSCC stated, “This culture of nonpayment that has emerged in California’s cannabis market leaves businesses across the entire industry and supply chain – as well as ancillary businesses that support legal cannabis operators – with outstanding balances and unpaid invoices sometimes totaling hundreds of thousands of dollars…This ballooning debt bubble in the cannabis industry will only continue to grow without proper oversight, putting the entirety of the state’s supply chain at risk of collapse and impacting state revenue decline even further.”

Opponents of the bill acknowledge the problem of non-payment in the industry, but feel AB 766 is too heavy handed and is “ripe for abuse.” In a blog post for the international legal firm Harris Bricken, cannabis attorney Griffen Thorne writes, “[L]icensees who are reported would be legally prohibited from buying goods or services on credit from other licensees until they pay the invoices for which they were reported in full … The person making the report has to give the DCC almost no information in order to make the report. There is no hearing. There does not even seem to be an opportunity to contest the report. The second a report is made, the other side loses its rights to buy goods on credit – presumably even under preexisting contractual arrangements with third parties. This seems like an obvious due process concern and ripe for abuse.”

The number and amounts of unpaid cannabis product invoices have ballooned over time and have driven California cannabis vendors to take such extreme measures. Collections and outstanding receivables are a symptom of an industry struggling under heavy taxes and competition from illegal operations that pay no taxes whatsoever, and which now account for over 60% of all cannabis sales within the state.

In order to ascertain the current status of AB 766, 420CPA reached out to Assemblymember Phil Ting (D-San Francisco), co-sponsor of the bill along with FSCC, the Cannabis Distribution Association, California Cannabis Industry Association and the California Cannabis Manufacturers Association. We corresponded with Tania Dikho, Ting’s Legislative Director. Ms. Dikho informed us that the bill was heard in the Assembly Appropriations Committee on May 18, but it was not passed.

“It’s a 2-year bill meaning we can’t act on it until this legislative year is over, so the bill will not have another hearing [and we] can’t make any changes to it until next year,” explained Ms. Dikho.

The 2-year status is a tenuous one. The bill must be approved by the Assembly and make its way to the Senate between early January 2024 and January 31, 2024 or it may no longer be acted upon and will die a legislative death.

Businesses that would like to voice their opinion for or against AB 766 should contact their state legislative representatives.

A Research Study on the Antimicrobial Properties of Cannabis

By Cindy Orser, PhD
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Inexpensive in vitro Methods to Evaluate the Impact of Cannabinoid-containing Products on Sentinel Lactobacillus spp. 

S. Lewin 1, A. Hilyard2, H. Piscatelli1, A. Hangman1, D. Petrik1, P. Miles2, and C. Orser2

1MatMaCorp Inc, Lincoln NE; 2Apothercare LLC, Boston MA 

Abstract

The public has readily embraced cannabidiol (CBD) in countless unregulated products that benefit from commercial promotion without FDA oversight, who recently concluded: “that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products w/ the regulatory oversight is needed to manage risks.”1 The reported antimicrobial properties of CBD combined with the recent proliferation of cannabinoid-containing products marketed to women for intimate care led us to explore the impact on the sentinel lactobacilli species associated with a healthy reproductive tract. Except for lubricants and tampons, the FDA regulates intimate care products as cosmetics. Even non-cannabis serums, washes, and suppositories are not required to be tested for their effect on the reproductive microbiota. We aimed to investigate the utility of easy-to-use, inexpensive in vitro assays for testing exogenous cannabis products on reproductive microbiota. In vitro assays can provide important evidence-based data to inform both manufacturers choosing both an active cannabinoid ingredient source as well as excipient chemicals and consumers in the absence of safety or quality data. In simple, straightforward exposure studies, we examined the antimicrobial activity of CBD and cannabigerol (CBG) on the most dominant vaginal lactobacilli species, L. crispatus, associated with good health.

Introduction

The testing of readily available products containing cannabinoids, predominately CBD following the widespread legalization of hemp by the 2018 US Farm Bill, is not required beyond ensuring THC content is below 0.3%. Therefore, basic information on safety, quality, antimicrobial activity, bioavailability, and dosing is unavailable and undocumented. The situation is further complicated by the complex chemoprofiles of cannabis extracts based on the cultivar, the extraction methods and subsequent cleanup, and other chemical excipients in the formulation. The FDA has finalized guidance on quality considerations for clinical research for the development of cannabis and cannabis-containing drugs intended for human use.

One approach to backfilling non-existent safety and quality data for cannabinoid active ingredients and those products made from them is to apply or devise assays that can provide relevant toxicity data in an in vitrosystem. Farha et al. (2020) reported that seven cannabinoids are potent antibiotics, including CBD and synthetic CBG. CBG inhibited the growth of gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA), but not gram-negative bacteria unless their outer membrane was permeabilized (Farha et al. 2020). In addition, several volatile terpenes, the main constituents of essential oils extracted from Cannabis sativa L., also have potent antibiotic activity against gram-positive bacteria (Iseppi et al. 2019). We have previously written about the risks associated with disrupting the healthy microbiome of gram-positive vaginal bacterial species leading to dysbiosis (Orser 2022) and its further health complications.

Several successful approaches to assessing the toxicity of CBD have already been reported including human cell culture work by Torres et al. (2022) who showed that pure CBD has a repeatable impact on cell viability, but that hemp-derived finished CBD products had variable impact. Cultured human cell viability experiments demonstrated similar potencies across three different hemp-derived CBD products in the microgram per milliliter [mg/mL] range with increased viability at lower doses [2-4 mg/mL] and decreasing cell viability above 6 mg/mL (Torres et al. 2022). In the same study, the authors demonstrated that the presence of terpenes, specifically b-caryophyllene, in hemp extraction matrices also impacted cell viability.

Neswell, a cannabis therapeutics company in Israel, demonstrated through the application of their in vitroneutrophil cell line that cannabis extracts have inherent immune response biodiversity, suggesting that the choice of a cannabis source should be based on its function rather than on its chemoprofile (https://www.neswell.net). Inflammatory cytokine levels in inflamed peripheral blood mononuclear cells (PB_MC) showed a 10-fold difference across hemp extract products containing unidentified terpenes in suppressing the inflammatory cytokine, TNFa (Torres et al. 2022). The influence of CBD concentration on inflammatory cytokine production was previously reported by Vuolo et al. (2015) and Jiang et al. (2022).

Materials & Methods

Chemicals and Products Tested

THC-free, 99% pure CBD and CBG isolates were purchased from Open Book extracts in North Carolina (openbookextracts.com). All other chemicals including erythromycin (EM), and growth media were obtained from Sigma-Aldrich (St. Louis MO). Specific reagents in the qPCR kits were assembled in-house at MatMaCorp Inc. (Lincoln NE).

Monitoring Cell Viability: OD600nm and plating

Individual frozen glycerin stocks of L. crispatus HM103 from BEI Resources Repository served as inoculum to streak on a sterile MRS agar plate and incubated anaerobically at 370C for 24-48 h until individual colony growth was observed. Single colonies were used to inoculate MRS broth and incubated for 24-48 h at 370C which served as the inoculum for exposure to test products. Exposed cultures and all control cultures were incubated at 370C for 48 h with OD600 readings taken at time zero, +24 h, and +48 h using disposable cuvettes in a standard spectrophotometer. The products were also plated onto MRS agar plates to evaluate inherent contaminants that could affect turbidity values.

Molecular Analysis by qPCR

DNA isolation from bacterial cultures was done using the MatMaCorp (Lincoln, NE) StickE Tissue DNA Isolation kit modified for bacteria as per manufacturer instructions. Briefly, a lysis buffer is applied to the sample followed by a heating step, and a binding buffer is added, thus allowing DNA from the solution to bind to the matrix of the StickE column. The column was washed prior to eluting the purified DNA. Per manufacturer instructions, 10 µL of isolated DNA was used as a template for genetic analysis in a Lacto-TM assay (MatMaCorp). The assay is a customized TaqMan-based detection assay that is conducted using a four-channel fluorescence detection platform, the Solas 8 (MatMaCorp). The assay was designed to detect the unique 16S-rRNA DNA sequence for L. crispatus. Briefly, the assay is a probe-based method that begins with hybridizing the custom-designed probes with their desired nucleic acid target found in the sample. Once hybridized, detection takes place from the fluorescently labeled primer. The target has been assigned a channelon the Solas 8 and is detected independently. 

Calling the Results

The calling algorithm uses first-order kinetics reaction properties (inflection point detection) in combinationwith a measure of the closeness of the signals associated with a specific target. Various indicators are tracked during the reactions to perform an on-the-fly analysis. The analysis is then consolidated by a measure of the similarity between the fluorescence signals at the end of the run. Aggregating values from the similarity measure, the end gain and the inflection point detection allow the Solas 8 software to make the call at the end of the run without having to compare a results library of known sample targets.

Figure 1: qPCR Findings

Results

Exposure of L. crispatus

Anaerobically grown cultures of L. crispatus were exposed to either CBD isolate or CBG isolate at each of two concentrations [5 mg/mL] and [10 mg/mL] with all appropriate controls. All treatment groups were evaluated by qPCR, turbidity at OD600, and plate counts.

Molecular Analysis via qPCR

These data show the specificity of the Solas8 testing for evaluating these products, as a molecular-level screening is not influenced by test product solubility, opacity, or non-specific contamination present in some of the tested products that can interfere with optical density measurements.

Growth Monitoring

Figure 2: Turbidity

Turbidity monitoring, albeit non-specific, confirmed the species-specific qPCR findings, that is no inhibition for the two cannabinoid isolates evaluated (Fig. 2).

Conclusions

In this limited in vitro study using a sentinel lactobacilli response, we have shown that 99% pure CBD and CBG isolates were not inhibitory at the two doses evaluated by complementary observations following turbidity, plating, and by qPCR. Limitations in this study prevent definitive conclusions regarding what individual or combination of cannabinoids or other cannabis secondary metabolites are inhibitory in vivo to dominant lactobacilli species in the reproductive tract. These limitations include commercial product testing without knowledge of excipients or impact on the bioavailability of any active cannabinoid ingredients. In addition, dose-response curves were not generated and exposure under micro-aerobic conditions was not carried out.

Cannabidiol’s potential as an antimicrobial agent may be limited by its extremely low solubility in water and a propensity to stick to spurious proteins limiting systemic distribution in the body as a therapeutic. Interpreting microbiome study findings to human health outcomes will require multi-disciplinary corresponding clinical data findings of disease diagnosis, processes, and treatment within populations. Nonetheless, this nascent translational research opportunity is vast with the promise of benefiting patient outcomes (Wensel et al. 2022).

Health Canada released a scientific review report on products containing cannabis, specifically containing 98% or greater CBD and less than 1% of THC (Health Canada 2022) while the FDA just concluded that there are no existing guidelines applicable for recommending safety and quality guidelines to manage risk for CBD products (U.S. FDA 2023). The Health Canada committee unanimously agreed that short-term use of CBD is safe at 20 mg per day up to a maximum dose of 200 mg per day and that packaging should include both dosing instructions and potential side effects. The Committee did not address the antimicrobial potential of CBD or CBG formulations or specifically vulvar or vaginally administered cannabinoids. There is clearly more basic physiological research needed on the impact of self-administration of CBD preparations based on the route of exposure.

References 

1. https://fda.gov/news-events/press-announcements/fda-concludes-existing-regulatory-frameworks-foods-and-supplements-are-not-appropriate-cannabidiol

Farha MA, El-Halfawy LM, Gale RT, MacNair CR, Carfrae LA, Zhang X, Jentsch NG, Magolan J, Brown ED (2020) Uncovering the hidden antibiotic potential of cannabis. ACS Infect Dis 6:338-346. 

Health Canada (2022). https://www.canada.ca/content/dam/hc-sc/documents/corporate/about-health-canada/public-engagement/external-advisory-bodies/health-products-containing-cannabis/report-cannabidiol-eng.pdf 

Hopkins AL (2008) Network pharmacology: the next paradigm in drug discovery. Nat Chem Biol 4(11):682-90.

Iseppi R, Brighenti V, Licata M, Lambertini A, Sabia C, Messi P, Pellati F, Benvenuti S (2019) Chemical characterization and evaluation of the antibacterial activity of essential oils from fibre-type Cannabis sativa L. (Hemp) Molecules 24:2302; doi:10.3390/molecules24122302.

Jiang Z, Jin S, Fan X, Cao K, Liu Y, Want X, Ma Y, Xiang L (2022) Cannabidiol inhibits inflammation induced by Cutibacterium acnes-derived extracellular vesicles via activation of CB2 receptor in keratinocytes. J Inflammation Res 15:4573-4583.

Orser CS (2022) Prevalence of Cannabinoid-containing Intimate Care Products Exposes Longstanding Unmet Need for Safety Data on Community Microbiota Exposure. https://cannabisindustryjournal.com/feature_article/intimate-care-products-with-cannabinoids-need-more-safety-data/

Torres AR, Caldwell VD, Morris S, Lyon R (2022) Human cells can be used to study cannabinoid dosage and inflammatory cytokine responses. Cannabis Sci & Tech 5(2) 38-45).

U.S. FDA (2023) https://www.fda.gov/news-events/press-announcements/fda-concludes-existing-regulatory-frameworks-foods-and-supplements-are-not-appropriate-cannabidiol

Vuolo F, Petronilho F, Sonai B, Ritter C, Hallak JE, Zuardi AW, Crippa JA, Dal-Pizzol F (2015) Mediators Inflamm 538670

Wensel CR, Salzberg SL, Sears CL (2022) Next-generation sequencing insights to advance clinical investigations of the microbiome. J Clin Invest 132(7):e154944. https://doi.org/10.1172/JCI154944.

Ask the Experts: Supply Chain Risks in Hemp & Cannabis

By Cannabis Industry Journal Staff
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There are a lot of risks throughout the entire supply chain in the cannabis and hemp markets. Legal and regulatory issues, quality control reliability, security problems, product safety, potency, and constantly changing supply and demand are just a few major risks cannabis operators must stay on top of. A lot of companies mitigate these risks by implementing programs to find the source and figure out what actions could alleviate it. Those actions can look like reviewing testing or certification reports, auditing supplier facilities, and much more.

Jennifer Lott, AMAS Service Delivery Director for the standards certification body, BSI, has over 25 years of experience in quality, safety, lab management, consulting, packaging, and systems development. She’s an expert in GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, WHO GDP, RSPO, food safety, GMP/HACCP and much more.

She is a panelist for an upcoming webinar, Supply Chain Risks in Hemp and Cannabis June 27, 2023. During that webinar, she’ll join other experts where they’ll discuss some of the supply chain risks cannabis companies face and what they can do to mitigate those risks.

Ahead of her webinar, where she’ll take a deep dive into supply chain risks, we sat down with Lott to get a preview for what she’ll talk about.

Q: What are the major supply chain issues faced by the cannabis and hemp markets currently?

Jennifer Lott: The U.S. market remains highly complicated for cannabis companies and investors. Fewer than half of U.S. states and territories have legalized recreational cannabis use as of Nov. 2022.

To this day, cannabis is still a Schedule one substance under the Controlled Substances Act, alongside drugs like heroin, LSD and ecstasy – an issue that has led to several regulatory and fiduciary challenges for growers, processors, and distributors of cannabis/hemp.

Legal concerns aside, cannabis companies operate much like other businesses and face almost the same exposures that most enterprises do. Here are the top risks cannabis businesses encounter, according to experts.

  • Distribution – Current regulations prevent products from one state to be transported to another state.
  • Natural disasters – including wildfires, storms, and flooding, can easily damage crops
  • Cybersecurity – Because of the type of information that cannabis companies handle, they can also become a prime target for hackers.

Despite the supply chain challenges mentioned above, the cannabis industry is growing, and its use is becoming more accepted in society, but still faces major challenges. These trends also will create a volatile and fast-changing environment cannabis companies in 2023. The big challenge will be deciding which of the scores of startups, IPOs and established cannabis companies can surmount the upheaval and succeed long term.

Q: How are companies mitigating risks and what tools are at its disposal?

Lott: Anyone involved in the cannabis/hemp business knows they need to manage their risk with a solid risk management plan.

The three biggest risks facing cannabis/hemp businesses aside from the supply chain issues mentioned above, include:

  • Employee theft – employees have easy access to the product, run cash registers at dispensaries, and generally know a lot about the inner workings of the company. Protecting against insider theft is critical for the business.
  • Product tampering – this can happen at any stage in the supply chain. Businesses whose products cause harm could be liable for injury and damages.
  • Compliance regulations – compliance varies from state to state and laws are frequently changing.

Thanks to regulatory uncertainty and limited access to tools other industries have access to, the cannabis industry likely will have an increased risk profile for the foreseeable future. This heightens the need for a structured, risk management approach. However, even with so many external factors out of its control, cannabis companies still can dramatically decrease risks by addressing internal strategies and processes.

Cannabis companies with effective, relevant, and well-documented risk management practices can better positioned to create and preserve capital, attract investment, and achieve long-term sustainable growth.

Jennifer Lott is speaking at the Supply Chain Risks in Hemp and Cannabis Webinar, taking place June 27 at 11:00 am EST. Click here to register.

About Jennifer Lott

Jennifer Lott is the AMAS Service Delivery Director for the internationally recognized standards certification body, BSI. Jennifer currently supports the quality and integrity of food and fast-moving consumer products. She is an accredited Lead Auditor and Trainer with over 25 years of experience in quality and safety, management system development, consulting, packaging, and laboratory management. Jennifer’s expertise includes GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, BRC GS Consumer Products, WHO GDP, EudraLex, BRC GS Storage & Distribution, BRC GS Packaging, BRC GS Agents & Brokers, RSPO, Food Safety, and GMP/HACCP.

Content Sponsored by BSI

Stemming the Tide: Strategies for Cannabis Testing Labs & Regulators to Address THC Inflation and Lab Shopping

By Arun Apte
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The cannabis industry in the United States is booming. In just a few years, it has gone from a small, underground market to a multi-billion-dollar industry. This growth is due in part to the legalization of cannabis in many states, as well as the growing public acceptance of its use for both medical and recreational purposes.

The industry is still in its early stages, but it has the potential to be a major economic driver for the United States. However, the industry’s success has brought with it challenges, such as THC inflation. This is when growers inflate the THC levels of their products in order to sell them for a higher price. This practice has led to widespread lab shopping, as growers send their products to labs that promise to give them the highest THC readings.

THC Inflation and Lab Shopping: A Look Under the Hood

Among cannabis enthusiasts, a prevailing belief circulates, asserting that cannabis products with elevated THC levels inherently possess greater potency and induce more pronounced effects. Nevertheless, this belief rests upon a fallacy, for it erroneously assumes that THC levels alone dictate the overall potency of a cannabis product. Genuinely comprehending the potency and effects of cannabis products requires the consideration of an array of factors. These factors include the presence of other cannabinoids and terpenes, the method by which the substance is consumed, as well as an individual’s metabolic and tolerance peculiarities. For instance, a particular strain of cannabis with low THC content, but elevated levels of other cannabinoids and terpenes, may engender a more intense impact in contrast to a variety exhibiting higher THC levels but diminished quantities of other compounds.

This misguided notion that heightened THC levels correspond to augmented potency has contributed to a surge in the demand for high-THC products. Consequently, producers have resorted to offering incentives to labs that provide inflated THC numbers for their products. Thus, certain labs have engaged in a practice coined as “lab shopping,” whereby they furnish reports that align with the producers’ desired THC levels, rather than accurately reflecting the genuine levels present within the product.

The manipulation of THC levels and the deceitful practice of lab shopping inflict profound damage upon the cannabis industry, eroding the foundation of trust. The fact that growers selectively collaborate solely with labs that yield desired outcomes, generates a mirage of superiority surrounding their products, thus deceiving consumers. Consequently, unsuspecting customers find themselves in possession of goods that fall far short of the promised standards of potency or quality. Moreover, this predicament places labs that remain steadfast in their commitment to integrity and the provision of accurate test results at an unfair disadvantage.

Fighting Back to Eradicate THC Inflation and Lab Shopping in the Cannabis Industry

The relentless surge of THC inflation finds its origins in the glaring absence of standardized testing protocols within the cannabis industry. As each lab embraces diverse methodologies and tools, testing produces disparate outcomes. This dissonance becomes a fertile ground for unscrupulous labs, who seize the opportunity presented by this lack of uniformity to peddle false THC numbers. To compound matters, the scope for manual interference looms large. The solution to this problem is to create a set of standards that everyone in the cannabis industry must follow. It’s important for the industry to come together and establish a common set of rules for testing. This will ensure that all labs consistently follow the same procedures and produce accurate results. In addition, it is important to have different labs take part in proficiency testing to find outlier labs. States should also take quick action to punish labs that provide incorrect or exaggerated THC values in their reports.

A representation of various ways to arrest the budding trend of THC inflation and lab shopping (Figure courtesy CloudLIMS)

It is extremely important to prioritize transparency among labs in order to address the growing concerns regarding the inflation of THC potency. State regulatory bodies can achieve this by conducting frequent audits to detect and correct any inconsistencies or inaccuracies in the data. To make this possible, state agencies need to hire skilled data scientists who can thoroughly analyze the data produced by labs. If the industry collectively works towards addressing these issues, it will enhance consumer trust in the regulated market. By eliminating the incentives that drive THC potency inflation, a more trustworthy cannabis industry can take shape and flourish. 

Next, it is crucial to educate customers about the false notion that higher THC levels always result in stronger effects. Through effective communication and raising awareness, the industry can address the issue of THC potency and discourage the practice of selectively choosing labs with desired results.

Finally, labs should achieve accreditation to ISO/IEC 17025 as evidence of their competence in producing trustworthy results. This will help restore customer trust in the regulated cannabis industry and establish a stronger system for quality assurance.

The Importance of Deploying a Cannabis Lab Testing Software

Having a Laboratory Information Management System (LIMS) is essential to meet the challenging ISO/IEC 17025 requirements. This system plays a critical role in providing an extra level of assurance and trust in the accuracy of lab results. By automating processes, integrating analytical instruments, and adhering to rigorous quality standards, a cannabis lab testing software minimizes the possibility of manual manipulation of test results. 

Furthermore, a cannabis lab testing software maintains a sample chain-of-custody (CoC) through the sample life cycle and tracks samples using barcodes. Furthermore, it generates custom reports that include scannable QR codes, which can be instantly shared with customers. By configuring the QR code, it becomes possible to include a link to the original Certificate of Analysis (CoA) produced by a lab. This allows buyers to verify the reported composition on the product label by referring to the authentic test results on the CoA. This approach promotes transparency, trust, and accountability within the cannabis industry. 

Tackling THC Inflation & Lab Shopping with Cannabis Lab Testing Software
Cannabis lab testing software to manage and track samples through their lifecycle and maintain a CoC (Figure courtesy CloudLIMS)

A cannabis lab testing software carefully monitors and records all activities, such as staff logins, document modifications, sample records, and test results, with a date and time stamp along with the name of the person who performed those activities. This thorough record-keeping process eliminates any chance of manual tampering with lab data, thereby enhancing the reliability and defensibility of test results. Moreover, the system effectively manages the outcomes of various Quality Control (QC) samples to guarantee accurate test results. By comparing the test results of QC samples with the samples being tested, the system can identify any analytical errors and enable lab managers to fix them, enabling labs to uphold quality standards.

The cannabis industry has experienced swift expansion as a result of cannabis legalization in multiple states across the United States. This has brought about various advantages, such as increased demand for cannabis products and the creation of new employment opportunities and tax revenue. However, the industry has faced challenges such as the issues of THC inflation and lab shopping. Dishonest producers and labs take advantage of the lack of standardized industry practices to deceive regulators and consumers. To address this issue, it is crucial to establish industry-wide testing standards that ensure consistency and accuracy across all labs. State agencies must also take prompt action to penalize labs that provide false THC values. Additionally, educating consumers about the misconceptions surrounding high THC levels and potency is important to combat this detrimental trend in the industry. Implementing cannabis lab testing software can help reduce the potential for human error and guarantee the authenticity and reliability of lab data. 

This nascent but fast-growing industry holds remarkable promise for medicine and the economy, which can only be realized if proper safeguards are put in place and malpractices are stopped in their tracks.

Building An Integrated Pest Management Plan – Part 1

By Phil Gibson
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This is the first part of a series of articles designed to introduce an integrated pest management framework for cannabis cultivation facilities. Part one details an overview of the plan as well as pest identification. Part two comes out next week and will delve into the world of pest monitoring and record keeping. Stay tuned for more!

Figure 1: Integrated Pest Management Cycle

Background

Integrated Pest Management (IPM) is a philosophy of pest prevention and control that integrates cultural, mechanical, physical and chemical practices to control pest populations within an acceptable degree of economic tolerance.

IPM encourages growers to take a step-wise approach to determine the most appropriate means necessary for avoiding pest-related economic injury through careful consideration of all available pest control practices.

When practicing IPM, less invasive non-chemical practices are given priority, until escalation necessitates otherwise.

This is Part 1: Pest Identification & Monitoring/Communications

Personal experience in a facility is a great place to start. Review your history and identify a list of pests that you have experienced in this or previous grows. Point out which pests currently exist where they were or are currently and possible sources of the contamination/infestation.

Figure 2: Healthy Aeroponic Mother Stock

Map out your facility with clear entry/exits, plumbing & drainage and air flow access to visually see and understand potential access points for crawling, flying or airborne pests.

From your nursery mother room to cloning and vegetation areas, what are the transfer methods as you move from one area to another. Are pests present in these areas? Where could they have come from? Oftentimes, a cultivator may not have the space for their own mother and cuttings/cloning space. In these cases, where did the outsourced clones come from? What are the IPM controls in place for these genetic sources? Are they carriers of the challenges transferred to your own facility? It is important to identify the possible source of pest potentials

Does your flower room have white flies or fungus gnats? Locating these and identifying the likely source is a good place to start if you have an ongoing infestation.

Figure 3: Example Aeroponic Facility Layout For IPM Planning

Powdery mildew is a routine challenge if air into your facility is not filtered and sterilized to eliminate these spores.

What is the Source of Your Irrigation/Fertigation Water?

Water is a crucial element for high-value indoor farms such as those that grow cannabis. However, water can also be a source of disease-causing microorganisms that can negatively impact the growth and yield of crops. Monitoring, filtering and sterilizing the biological contents of water is therefore crucial in ensuring the health and quality of high-value crops.

Unfiltered water can contain a range of pathogens such as bacteria, viruses, fungi and parasites that can cause root, stem and bud rot. These diseases can cause significant losses in crop yield and quality, which can be devastating for indoor farmers growing high-value crops.

Figure 4: Precision Aeroponics at FarmaGrowers GMP Facility, South Africa

Monitoring the quality of water that is brought into the indoor farm is the first step in ensuring that the water is free from harmful pathogens. This involves regular testing of the incoming water for parameters such as pH, dissolved oxygen, TDS, nutrient content and microbial load. This allows cultivators to identify aspects of the incoming water they need to address before the water is provided to their crops to prevent potential problems.

Is your plumbing building biofilm that is feeding into your irrigation lines? Obviously, there are many potential sources when you go through an inventory of the risks for your facility. From that initial step, you will build your management team and label who should be contacted when a pest is found. Do you have an IPM specialist or is this a resource that needs to be contracted to address an infection?

Building this communications tree is your first step to fewer pest issues and higher yields and potency.

For the complete white paper on Integrated Pest Management Recommendations, download the document here. Part two comes out next week and will delve into the world of pest monitoring and record keeping. Stay tuned for more!