Tag Archives: marijuana

March 28, 2018

Environmental Controls: The Basics

By Vince Sebald

The outside environment can vary widely depending on where your facility is located. However, the internal environment around any activity can have an effect on that activity and any personnel performing the activity, whether that’s storage, manufacturing, testing, office work, etc. These effects can, in turn, affect the product of such activities. Environmental control strategies aim to ensure that the environment supports efforts to keep product quality high in a manner that is economical and sensible, regardless of the outside weather conditions.

For this article, let us define the “environment” as characteristics related to the room air in which an activity is performed, setting aside construction and procedural conditions that may also affect the activity. Also, let us leave the issue of managing toxins or potent compounds for another time (as well as lighting, noise, vibration, air flow, differential pressures, etc). The intent here is to focus on the basics: temperature, humidity and a little bit on particulate counts.

Temperature and humidity are key because a non-suitable environment can result in the following problems:

Operator discomfort
Increased operator error
Difficulty in managing products (e.g. powders, capsules, etc)
Particulate generation
Degradation of raw materials
Product contamination
Product degradation
Microbial and mold growth
Excessive static

USP <659> “Packaging and Storage Requirements” identifies room temperature as 20-25°C (68-77 °F) and is often used as a guideline for operations. If gowning is required, the temperature may be reduced to improve operator comfort. This is a good guide for human working areas. For areas that require other specific temperatures (e.g. refrigerated storage for raw materials), the temperature of the area should be set to those requirements.

Humidity can affect activities at the high end by allowing mold growth and at the low end by increasing static. Some products (or packaging materials) are hydroscopic, and will take on water from a humid environment. Working with particular products (e.g. powders) can also drive the requirement for better humidity control, since some powders become difficult to manage in either high or low humidity environments. For human operations without other constraints, a typical range for desirable humidity is in the range of 20 to 70% RH in manufacturing areas, allowing for occasional excursions above. As in the case of temperature, other requirements may dictate a different range.

In a typical work environment, it is often sufficient to control the temperature, while allowing the relative humidity to vary. If the humidity does not exceed the limits for the activity, then this approach is preferred, because controlling humidity adds a level of complexity (and cost) to the air handling. If humidity control is required, it can be managed by adding moisture via various humidification systems, or cooling/reheating air to remove moisture. When very low humidity is required, special equipment such as a desiccant system may be required. It should be noted that although you can save money by not implementing humidity control at the beginning, retrofitting your system for humidity control at a later time can be expensive and require a shutdown of the facility.

Good engineering practice can help prevent issues that may be caused by activities performed in inappropriately controlled environments. The following steps can help manage the process:

Plan your operations throughout your facility, taking into account the requirements for the temperature and humidity in each area and know what activities are most sensitive to the environment. Plans can change, so plan for contingencies whenever possible.
Write down your requirements in a User Requirement Specification (URS) to a level of detail that is sufficient for you to test against once the system is built. This should include specific temperature and RH ranges. You may have additional requirements. Don’t forget to include requirements for instrumentation that will allow you to monitor the temperature and RH of critical areas. This instrumentation should be calibrated.
Solicit and select proposals for work based on the URS that you have generated. The contractor will understand the weather in the area and can ensure that the system can meet your requirements. A good contractor can also further assist with other topics that are not within the scope of this article (particulates, differential pressures, managing heating or humidity generating equipment effects, etc).
Once work is completed, verify correct operation using the calibrated instrumentation provided, and make sure you add periodic calibration of critical equipment, as well as maintenance of your mechanical system(s), to your calibration and maintenance schedules, to keep everything running smoothly.

The main point is if you plan your facility and know your requirements, then you can avoid significant problems down the road as your company grows and activity in various areas increases. Chances are that a typical facility may not meet your particular requirements, and finding that out after you are operational can take away from your vacation time and peace of mind. Consider the environment, its good business!

March 27, 2018

A2LA Accredits First Cannabis Lab in PA

By Aaron G. Biros

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According to a press release sent out this morning, the American Association for Laboratory Accreditation (A2LA) accredited their first Pennsylvania cannabis-testing laboratory. Located in Harrisburg, PA, Keystone State Testing finalized their accreditation for ISO/IEC 17025 on February 21, 2018.

A2LA also accredited the laboratory to two cannabis-testing-specific programs, ISO/IEC 17025 – General Requirements for the Competence of Testing and Calibration Laboratories and A2LA R243 – Specific Requirements – Cannabis Testing Laboratory Accreditation Program. The R243 program is a collaboration with Americans for Safe Access (ASA) that takes some recommendation for regulators from the American Herbal Products Association (AHPA).

KellyGreenland — Dr. Kelly Greenland, owner and operator of Keystone State Testing

Keystone State Testing is now able to perform all of the tests for cannabis products under the state of Pennsylvania’s regulations. According to Dr. Kelly Greenland, owner and operator of Keystone State Testing, getting accredited is about safeguarding patient safety. “Keystone State Testing is proud to be the first Pennsylvania laboratory to earn A2LA ISO/IEC 17025 accreditation as well as ASA’s Patient Focused Certification,” says Dr. Greenland. “We regard these accreditations and certifications as the first steps in ensuring patient safety and will continue to do everything within our power to ensure medical marijuana patient safety.”

A2LA General Manager Adam Gouker says he wants to see more accreditations include the ASA requirements in R243. “A2LA is pleased to see the growing adoption of the combined assessment to include the ASA requirements,” says Gouker. “Our staff has worked tirelessly in conjunction with ASA staff to create this combined program and offer something that no other accreditation body in the world offers. We congratulate Keystone State Testing Labs on leading the charge in the state of Pennsylvania and laying the groundwork for future laboratories to follow.”

March 22, 2018

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Paradox Or Paragon? A Non-Techie Look At Blockchain and Cannabis: Part III

By Marguerite Arnold

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Disclaimer: Marguerite Arnold has just raised the first funds for her blockchain-based company, MedPayRx in Germany (and via traditional investment funding, not an ICO). She will also be speaking about the impact of blockchain on the cannabis industry in Berlin in April at the International Cannabis Business Conference.

Part I of this series was an overview discussion of blockchain, cryptocurrencies and cannabis and Part II dove into some of the pitfalls of ICOs in the cannabis space. This is the third and final piece of this series.

Beyond raising money or tying a tradable altcoin to cannaproduct, there are many places where blockchain technology can (and will) be used to great effect in the cannabis industry.

In fact, ICOs and cryptocurrency are only part of the blockchain discussion for the cannabis industry. In general, the technology will disrupt the vertical just like it is upending other businesses right now. However, for the moment at least, it will prove most useful in the most complicated and challenging technical and regulatory areas – supply chain product tracking being the lowest hanging fruit (which is still fairly high off the ground for a number of reasons). If evaluating blockchain tech is too onerous (which it usually is for the average investor or even senior cannabis exec), there are other options. Look for innovative mobile DApps (distributed apps that use blockchain for a specific purpose) and smart business cases.

The fascinating reality is that where there are service models that can be adapted to regulatory guidelines, blockchain promises, in fact, to remove the red tape and paperwork holding the industry back internationally. The impact on research and testing will also be huge.The rules are certainly changing with regards to public companies and cannabis.

The technology, or even the regulations, in other words, is not necessarily all to blame for the many issues budding blockchain entrepreneurs currently face. This space-age techie stuff, no matter how mind-blowing, is still “just” a tool. As the late Peter Drucker famously said, the raison d’etre of every successful business is one that solves a critical need for their customer. Find one for the industry that happens to use the technology, and you might just retire early. But there is a lot of road between that reality and now. And there probably will not be an ICO on that path. Not in most jurisdictions, and certainly not without complications in every one of them.

With an internationally stock-listed Canadian cannabis business now developing, the rules are certainly changing with regards to public companies and cannabis. For all the press that Cronos recently received for getting listed on the NASDAQ, AbCann got (relatively quietly) listed in Frankfurt last summer. Canopy and Aurora have also just become two of the hottest stocks in Sweden.

That said, these are public companies with regular stock issuances. What that means for ICO issuances related to the cannabis industry in Canada specifically is anyone’s guess at the moment. In Germany presently, this is mine-strewn territory. But even here, that will be driven as much if not more by banking law than canna-reform, just like everywhere else.

Not to mention this of course: Given the choice of investing in a public cannabis company already in business with its stock conveniently listed and purchasable via a regular exchange, what would most people choose? It’s just a whole lot easier than taking a flier on a cannabis-themed ICO offering for a concept that may be a great idea, but will never materialize. Or find a bank. Even in Europe or Canada.

The End Game Is Rosy Even If The Path Is Unclear

Despite all the caveats, the impact on the cannabis industry of this technology will be large – far beyond finance in other words – and in ways that are not necessarily all understood even now. The potential impacts on research, compliance and even further reform, however, are already clear. And for the most part, potentially very positive.

For that reason, there is no such thing as a blanket “yes” or “no” at any part of this discussion. Regulatory environments regarding both cannabis and blockchain are changing everywhere. Go slow and with caution is the watchword of the day. Look for interesting beta projects and track them.This is a rapidly changing territory in every direction.

Mentioning cannabis and blockchain if not cryptocurrency in the same breath is also legit, now. As little as 2 years ago, the idea or any combination of the two terms in fact, for whatever reason, was widely dismissed as just another iteration of Silk Road.

When combining this technology and cannabis, in other words, expect either amazing results or fantastic explosions that create a lot of heat and noise but go nowhere. There is more room, in other words, for a cannabis.io to become the industry’s NextGen Pets.com than Google or Facebook. That said, there are experiments going on now, in several countries where the banking and insurance questions are being addressed early (Germany, Canada, Australia and Israel all being such locales) where such issues have begun to be addressed up front.

In summary? Stay tuned and watch this space. This is a rapidly changing territory in every direction.

March 21, 2018

From The Lab

The Case for ISO/IEC 17025 Accreditation in Cannabis Testing Laboratories

By Amy Ankrum

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Government regulations keep millions of Americans safe every year by controlling what companies can put in their products and the standards those products must meet to be sold to consumers.

Enter the strange case of legal cannabis: In order for cannabis to be legally distributed by licensed medical professionals and businesses, it must be tested. But unlike other consumable goods, cannabis is not regulated by the FDA. Without an overarching federal policy requiring cannabis testing laboratory accreditation, the testing and laboratory requirements differ greatly across state lines.For medical cannabis specifically, accredited testing facilities are especially important.

To be federally regulated, cannabis would first have to be federally legalized. It turns out that states and businesses alike are not willing to wait for a federal mandate. Many states have begun to adopt standards for cannabis testing and some, such as Ohio, have even announced mandatory ISO/IEC 17025 accreditation for all cannabis testing laboratories. As the industry evolves, increased compliance expectations are certain to evolve in tandem.

Some cannabis labs have even taken the initiative to seek ISO/IEC 17025 accreditation of their own volition. Seth Wong, President of TEQ Analytics Laboratories, shared in a press release:

“By achieving ISO/IEC 17025 accreditation, TEQ Analytical Labs believes that we can address the concerns throughout the cannabis industry regarding insufficient and unreliable scientific analysis by providing our clients with State required tests that are accredited by an international standard.”

Other laboratories, such as DB Labs in Las Vegas and EVIO Labs in Florida are also leading the accreditation charge in their respective states, ahead of any state mandates.

There are key reasons why accreditation in cannabis testing labs is important. First and foremost, cannabis is a consumable product. Like fruits and vegetables, cannabis is prone to pesticides, fungi and contaminants. The result of putting a potentially hazardous material on the market without proper and documented testing could lead to a public health crisis. An accredited testing lab, however, will ensure that the cannabis products they test are free from harmful contaminants.

By utilizing role-based trainings, labs can trust employees are receiving proper onboarding.

For medical cannabis specifically, accredited testing facilities are especially important. Because many consumers of medical cannabis are immuno-compromised (such as in the case of chemotherapy patients), ensuring that products are free from any and all contaminants is critical. Further, in order to accurately determine both short- and long-term effects of prescribed cannabis consumption, accredited and compliant laboratories are necessary.

Accreditation standards like ISO/IEC 17025 also provide confidence that testing is performed properly and to an internationally accepted standard. Rather than returning a “pass/fail” rating on products, the Cannabis Safety Institute reports that an ISO/IEC 17025 laboratory is required to produce numerical accuracy percentages in testing for “at a minimum, cannabinoids, pesticides, microbiology, residual solvents, and water activity.” Reliable data sets that can be reviewed by both accreditors and the public foster trust between producers and consumers.

Finally, ISO/IEC 17025 accreditation demonstrates that a laboratory is properly staffed and trained. The Cannabis Safety Institute’s “Standards for Cannabis Testing Laboratories” explains that conducting proper analytical chemistry on cannabinoids (the chemical compounds extracted from cannabis that alter the brain’s neurotransmitter release) requires personnel who have met specific academic and training credentials. A system to monitor, manage and demonstrate proficiency is necessary to achieve and maintain accreditation. With electronic systems in place, this management and documentation minimizes risk and also minimizes administrative time tracking and maintaining training records.

Following the proper steps of a standardized process is key to improving and growing the cannabis industry in coming yearsFor cannabis testing labs, utilizing a comprehensive software solution to achieve and maintain compliance to standards such as ISO/IEC 17025 is key. Absent of a software solution, the necessary compliance requirements can become a significant burden to the organization. Paper tracking systems and complex spreadsheets open up organizations to the likelihood of errors and ultimately risk.

Because ISO/IEC 17025 has clearly defined expectations for training, a software solution also streamlines the training process while simultaneously documenting proficiency. By utilizing role-based trainings, organizations can be confident employees are receiving proper onboarding and in-service training. Additionally, the effectiveness of training can be proven with reports, which results in smoother audits and assessments.

Following the proper steps of a standardized process is key to improving and growing the cannabis industry in coming years- which means utilizing technology tools such as electronic workflows to ensure proper process controls. Beyond adding critical visibility, workflows also create efficiencies that can eliminate the need to increase staffing as companies expand and grow.

For an industry that is changing at a rapid pace, ensuring traceability, efficient processes and visibility across organizations is paramount. Using a system that enables automation, process control, document management and documented training procedures is a step in the right direction. With the proper software tools in place, cannabis testing labs can achieve compliance goals, demonstrate reliable and relevant results and most importantly ensure consumer safety.

March 21, 2018

Maintenance and Calibration: Your Customers Are Worth It!

By Vince Sebald

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Ultimately, the goal of any good company is to take care of their customers by providing a quality product at a competitive price. You take the time to use good practices in sourcing raw materials, processing, testing and packaging to make sure you have a great final product. Yet in practice, sometimes the product can degrade over time, or you find yourself facing costly manufacturing stoppages and repairs due to downed equipment or instrumentation. This can harm your company’s reputation and result in real, negative effects on your bottom line.

One thing you can do to prevent this problem is to have a properly scaled calibration and maintenance program for your organization.

First, a short discussion of terms:

Balance Calibration — Figure 1– Periodic calibration of an electronic balance performed using traceable standard weights helps to ensure that the balance remains within acceptable operating ranges during use and helps identify problems.

Calibration, in the context of this article, refers to the comparison of the unit under test (your equipment) to a standard value that is known to be accurate. Equipment readings often drift over time due to various reasons and may also be affected by damage to the equipment. Periodic calibration allows the user to determine if the unit under test (UUT) is sufficiently accurate to continue using it. In some cases, the UUT may require adjustment or may not be adjustable and should no longer be used.

Maintenance, in the context of this article, refers to work performed to maximize the performance of equipment and support a long life span for the equipment. This may include lubrication, adjustments, replacement of worn parts, etc. This is intended to extend the usable life of the equipment and the consistency of the quality of the work performed by the equipment.

There are several elements to putting together such a program that can help you to direct your resources where they will have the greatest benefit. The following are some key ingredients for a solid program:

Keep it Simple: The key is to scale it to your operation. Focus on the most important items if resources are strained. A simple program that is followed and that you can defend is much better than a program where you can never catch up.

Written Program: Your calibration and maintenance programs should be written and they should be approved by quality assurance (QA). Any program should include the following:

Equipment Assessment and Identification: Assess each piece of equipment or instrument to determine if it is important enough to be calibrated and/or requires maintenance. You will probably find much of your instrumentation is not used for a critical purpose and can be designated as non-calibrated. Each item should have an ID assigned to allow tracking of the maintenance and/or calibration status.
Scheduling System: There needs to be some way to schedule when equipment is due for calibration or maintenance. This way it is easy to stay on top of it. A good scheduling system will pay for itself over time and be easy to use and maintain. A web-based system is a good choice for small to mid-sized companies.
Calibration Tolerance Assignment: If you decide to calibrate an instrument, consider what kind of accuracy you actually need from the equipment/instrument. This is a separate discussion on its own, but common rule of thumb is that the instrument should be at least 4 times more accurate than your specification. For very important instruments, it may require spending the money to get a better device.
Calibration and Maintenance Interval Assignments: Consider what interval you are going to perform maintenance for each equipment item. Manufacturer recommendations are based on certain conditions. If you use the equipment more or less often than “normal” use, consider adjusting the interval between calibrations or maintenance.
OOT Management: If you do get an Out of Tolerance (OOT) result during a calibration and you find that the instrument isn’t as accurate as you need. Congratulations! You just kept it from getting worse. Review the history and see if this may have had an effect since the last passing calibration, adjust or replace the instrument, take any other necessary corrective actions, and keep it up.
Figure 2- Maintenance engineers help keep your systems running smoothly and within specification for a long, trouble-free life.
Training: Make sure personnel that use the equipment are trained on its use and not to use equipment that is not calibrated for critical measurements. Also, anyone performing calibration and/or maintenance should be qualified to do so. It is best to put a program in place as soon as you start acquiring significant equipment so that you can keep things running smoothly, avoid costly repairs and quality control problems. Don’t fall into the trap of assuming equipment will keep running just because it has run flawlessly for months or years. There are many bad results that can come of mismanaged calibration and/or maintenance including the following:
Unscheduled Downtime/Damage/Repairs: A critical piece of equipment goes down. Production stops, and you are forced to schedule repairs as soon as possible. You pay premium prices for parts and labor, because it is an urgent need. Some parts may have long lead times, or not be available. You may suffer reputational costs with customers waiting for delivery. Some calibration issues could potentially affect operator safety as well.
Out of Specification Product: Quality control may indicate that product is not maintaining its historically high quality. If you have no calibration and maintenance program in place, tracking down the problem is even more difficult because you don’t have confidence in the readings that may be indicating that there is a problem.
Root Cause Analysis: Suppose you find product that is out of specification and you are trying to determine the cause. If there is no calibration and maintenance program in place, it is far more difficult to pinpoint changes that may have affected your production system. This can cause a very significant impact on your ability to correct the problem and regain your historical quality standards of production.

A solid calibration and maintenance program can go a long way to keeping your production lines and quality testing “boring”, without any surprises or suspense, and can allow you to put more sophisticated quality control systems in place. Alternatively, an inappropriate system can bog you down with paperwork, delays, unpredictable performance, and a host of other problems. Take care of your equipment and relax, knowing your customers will be happy with the consistent quality that they have become accustomed to.

March 21, 2018

The Necessity of Food Safety Programs in Cannabis Food Processing

By Gabe Miller

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When processing cannabis, in any form, it is critical to remember that it is a product intended for human consumption. As such, strict attention must also be paid to food safety as well. With more and more states legalizing either medical or recreational cannabis, the potential for improper processing of the cannabis triggering an illness or death to the consumer is increasing.

The FDA Food Safety Modernization Act (FSMA) is the new food safety law that has resulted in seven new regulations, many which directly or indirectly impact the production and processing of cannabis. Under FSMA regulations, food processors must identify either known or reasonably foreseeable biological, chemical or physical hazards, assess the risks of each hazard, and implement controls to minimize or prevent them. The FSMA Preventive Controls for Human Foods (PCHF) regulation contains updated food “Good Manufacturing Practices (cGMPs) that are in many cases made a requirement in a state’s medical or recreational cannabis laws. These cGMPs can be found in 21 CFR 117 Subpart B.

It is imperative that cannabis manufacturers have a number of controls in place including management of suppliers providing the raw material.Food safety risks in cannabis processing could originate from bacteria, cleaning or agricultural chemicals, food allergens or small pieces of wood, glass or metal. The hazards that must be addressed could be natural, unintentionally introduced, or even intentionally introduced for economic benefit, and all must be controlled.

It is unlikely that high heat, used in other food products to remove bad bacteria would be used in the processing of cannabis as many of its desirable compounds are volatile and would dissipate under heating conditions. Therefore, any heat treatment needs to be carefully evaluated for effectiveness in killing bacterial pathogens while not damaging the valuable constituents of cannabis. Even when products are heated above temperatures that eliminate pathogens, if the raw materials are stored in a manner that permits mold growth, mycotoxins produced by molds that have been linked to cancer could be present, even after cooking the product. Storage of raw materials might require humidity controls to minimize the risk of mold. Also, pesticides and herbicides applied during the growth and harvesting of cannabis would be very difficult to remove during processing.

It is imperative that cannabis manufacturers have a number of controls in place including management of suppliers providing the raw material. Other controls that must be implemented include proper cannabis storage, handling and processing as well as food allergen control, and equipment/facility cleaning and sanitation practices. Processing facilities must adhere to Good Manufacturing Practices (GMP’s) for food processing, including controls such as employee hand washing and clothing (captive wear, hair nets, beard nets, removal of jewelry, and foot wear) that might contribute to contamination. A Pest Control plan must be implemented to prevent fecal and pathogen contamination from vermin such as rodents, insects, or birds.

Processing facilities must be designed for proper floor drainage to prevent standing water. Processing air should be properly filtered with airflow into the cannabis processing facility resulting in a slightly higher pressure than the surrounding air pressure, from the clean process area outwards. Toilet facilities with hand washing are essential, physically separated from the process areas. Food consumption areas must also be physically separate from processing and bathroom areas and have an available, dedicated hand sink nearby. Employee training and company procedures must be effective in keeping food out of the processing area. Labels and packaging must be stored in an orderly manner and controlled to prevent possible mix-up.Cleaning of the processing equipment is critical to minimize the risk of cross contamination and microbial growth.

Written food safety operational procedures including prerequisite programs, standard operating procedures (SOP’s), etc. must be implemented and monitored to ensure that the preventive controls are performed consistently. This could be manual written logs, electronic computerized data capture, etc., to ensure processes meet or exceed FSMA requirements.

A written corrective action program must be in place to ensure timely response to food safety problems related to cannabis processing problems when they occur and must include a preventive plan to reduce the chance of recurrence. The corrective actions must be documented by written records.

Supply chain controls must be in place. In addition, a full product recall plan is required, in the event that a hazard is identified in the marketplace to provide for timely recall of the contaminated product.

Cleaning of the processing equipment is critical to minimize the risk of cross contamination and microbial growth. The processing equipment must be designed for ease of cleaning with the minimum of disassembly and should conform to food industry standards, such as the 3-A Sanitary Standards, American Meat Institute’s Equipment Standards, the USDA Equipment Requirements, or the Baking Industry Sanitation Standards Committee (BISSC) Sanitation Standards ANSI/ASB/Z50.2-2008.

Serious food borne contaminations have occurred in the food industry, and cannabis processing is just as susceptible to foodborne contamination. These contaminations are not only a risk to consumer health, but they also burden the food processors with significant costs and potential financial liability.

Anyone processing cannabis in any form must be aware of the state regulatory requirements associated with their products and implement food safety programs to ensure a safe, desirable product for their customers.

March 14, 2018

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Paradox or Paragon? A Non-Techie Look at Blockchain, Cryptocurrency & Cannabis: Part II

By Marguerite Arnold

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To read the first part of this series, click here. The Paragon class action lawsuit is likely to shake up two industries – the cannabis world, which has been following this situation at least in the industry press since the company began to raise money – and the ICO space in general. Why? Just the combination of the two topics is a guaranteed conversation starter. In addition, given the focus on whether tokens are securities or not (or whether so-called “utility tokens” are as well, depending on how they are used and sold) far beyond cannabis, this case may well begin to set precedent on the entire subject. Even more worrying for Paragon in particular right now, beyond the federal government, coordinated efforts are underway by both law firms and consumer groups to recruit aggrieved investors as suit plaintiffs. Beyond the United States and far from the Paragon case specifically, banks in Europe have begun to set guidelines on cryptocurrency and ICOs too. It is not routinely hostile everywhere (see Switzerland if not many Asian countries). But the map is now being defined.

The dilemma that Paragon is now facing is also something that has been coming for some time both for the company and others like them – and from both the cannabis investment and crypto coin directions. Digitally astute cannapreneurs take note: Do you really want your dream business used to define precedent as a defendant in a class action? Or targeted by the new SEC cyber unit whose job is to regulate ICOs (and probably “crowd sales” too?). That regulatory glare is coming everywhere. And soon. Globally.In the world of cannabis, in particular, it is also very important to be careful.

If issuing tokens, particularly if you sell them to raise money – no matter what that money will be used for – realize what you are doing. Even if you state to the world that these are not “investment” vehicles” but “utility” tokens. If you sell them, they are by definition, even if not federally litigated and defined yet in the United States, a contract for future worth, services or other benefit. An IOU in other words. As such they are also derivative securities, which is why the regulatory agencies, barely 10 years out of the last global financial meltdown, are now starting to see parallels. So much so, in fact, that SEC Chair Jay Clayton warned in January that any attorneys who are involved in ICOs might be in breach of professional obligations. Other jurisdictions are following suit.

In the world of cannabis, in particular, it is also very important to be careful. Selling (soon to be federally if not internationally regulated) tokens or securities in general for that matter for certain services or products that can be illegal in some jurisdictions is also a space that cannapreneurs are going to find challenging. See the banking problems of the entire U.S. cannabis industry. Same issue.

This is also going to get even more complicated very soon. Particularly in a world of shifting regs and when it comes to “brand creation.” Right now, for example, a crowdfund or ICO (the terms can be used interchangeably, token issue or not) for a “global cannabis lifestyle brand” promoted and sold online is highly problematic just about everywhere. Why? You cannot transport cannabis across state lines in the U.S. Americans and Israelis also still cannot export anywhere. You also cannot sell what is considered “medical” marijuana to a European regulator if it is not GMP certified. It is, according to local definition, most certainly not “medical”. You may also not distribute cannabis online in countries like Germany. And of course, cannabis itself is still federally illegal in many places, including the United States. Issuing a token or security with the intent of engaging in such practices is ill advised at this juncture. No matter what it is labelled.

Those are also situations where investors could legitimately also sue the ICO or crowd sale holder for breach of securities laws or outright fraud.

Beyond the world of banking law, users face other quagmires, depending on your situation and how you use and issue tokens. Or you certainly will in the emerging future. If you use tokens in situations where members “vote” you may also run into other problems. Like civil liberties issues. Poll taxes (where you force people to pay before access to voting or weigh the impact of their votes on financial contributions) is illegal in many jurisdictions and even more specifically certain use cases that may not always be initially obvious. How that plays out in blockchained ecosystems is a discussion of the future, but it is coming. Along with other labour and regulatory issues surrounding the use of “smart contracts.” Which are also known as “utility tokens.” See, it gets confusing. And fast.

In the cannabis space, liabilities sprout more quickly than even the fastest growing strain.As a result, the first major issue that any cannabis business considering a token generation event (or TGE) will face, no matter whether it is state or federally legit in said jurisdiction, has nothing to do with cannabis but rather rather cryptocurrencies and ICOs – and for right now federal if not international financial law – but look for that to also change as the space develops.

For the present, in most places, token issues where monetary value is assigned or implied are considered securities or even defined outright as currency. Or they will be soon. This means that if you are issuing a new coin for any purpose that you intend to sell for any purpose, including an ICO, especially one that will supposedly be used to pay for goods or services, or even to “assetize” the token to give it a market value (the value of the asset it is assigned), you are now in the federal end of the swimming pool. And federal if not international law is not for novices or sissies much less non-lawyers when it comes to crypto coin. There are great white sharks everywhere in this often-strange digital ocean. That is even before you get to cannabis.

In the cannabis space, liabilities sprout more quickly than even the fastest growing strain.

This is also easy to illustrate – even beyond the concept of an ICO. Say you are a cannabis producer in Colorado – where much of the legal cannabis industry we know today was born. You are in business, have a license and even own your grow space and the acres of real estate that it sits on. But you also want to access additional capital (including that of the international kind) and are, as an aside, overwhelmed by the demands of your cash business. You meet an energetic young blockchain geek who says she can sign you up to her service that will create your white paper, website and even hook you up to one of the several “insta-mint” crypto coin services now available for several thousand dollars (don’t forget lawyer’s fees), plus hiring a good PR firm to manage the ICO process.

Groovy.

You issue your own coins and literally mint them for the sole purpose of assigning each coin to every dried gram of your product that you produce to test the market before potentially holding an ICO. You then “sell” this bud (at wholesale prices) to a dispensary with a wallet that will accept your coin via a smart contract that only releases the funds when the right amount and quality of product is delivered to the dispensary. As a clever marketing technique, you also agree with the recreational dispensary you are working with (who happens to be in Aspen) that you both will also now offer jointly issued coins, at a higher retail price, to any tourist with a medical card or any age-appropriate recreational user who has the ID to prove it, to “pre-buy” their cannabis on the way to après ski and have it delivered, no questions asked, at the hot tub. You advertise the service with a cannabis-friendly ski package operator and travel agent, and voila – customer base is assured. If you have any celebrity friends who are willing to promote it, even better. And why not, while you are at it, do some LinkedIn outreach.

No cash needed either. ID verification happens with coin purchase.

Easy, right? So many headaches solved with one coin to rule them all. Banking issues evaporate along with a lot of work for accountants at both ends of the conversation. And the price of the coin you issue cannot be illegally pumped and dumped because the “price” is set by the state or federal market and/or supply and demand and/or another kind of asset (like a piece of real estate designed to be a startup incubator space for which people also pay entrance fees in your tokens, to enter and use). Then you can offer these “coins” for sale, at those market prices, set by the dried bud you are growing, to anyone, anywhere, to invest in too. Right?

No ICO, even. No problem. After all, you say they aren’t securities but “utility tokens.”

Wrong.

By definition, such activity is illegal in the United States if it has anything to do with the plant for the same reasons the U.S. industry remains a mostly cash-only business. There are several U.S. start-ups trying to construct “legal” payment gateways for the industry right now in the lower 48 plus 2 (see CanPay in Hawaii) and some creative efforts in Europe. However, all of those depend on the willingness of a banking institution on the other end to allow that to happen. See Uruguay if you still remain optimistic about any American efforts right now. Not to mention the newly awoken willingness of the federal DOJ to prosecute for money laundering in a post-Cole-memo world. And that includes you too, California.

But this is an issue that is not just limited to the United States.

In other places, like Canada, Australia, Israel and the Eurozone, legitimate cannabis businesses have bank accounts. And banks are absolutely involved in both the blockchain and crypto space – see Ripple. As a simplified payment gateway, the technology is imminently useful, if still forming. But banking authorities are so concerned about ICOs that they are moving, quietly, to implement policies against them even as they are still accepting cyber currency (in limited ways and via strictly controlled channels).

Given such concerns and divided loyalties, it is unlikely that authorities in Canada will sit this one out, even though (and perhaps because), to date, the most intriguing ideas about cryptocurrency and cannabis have tended to waft from this part of the world lately given what is about to happen this summer.

Most dangerous of all to the budding crypto cannapreneur is Germany – home of legal, public health insurance covering medical cannabis. Banking regulators in Frankfurt, in particular, have taken a dim view of even just regular old crowdfunding. Add a token into the mix and the Germans are even less amused. The persistent rumor in the Fintech community in Frankfurt this March is that German banking authorities are refusing to accept any funds raised during an ICO anywhere. Verboten for any purpose. Why? Even if they know who you are, and all of your investors meet their KYC requirements, they do not know the source of the cyber currency coming from those investors. No dice. And KYC in this instance does not refer to a new brand of cannabis-flavored lubricant. It is a term that means, in the most comprehensive understanding of how it must be used, not only “know your customer” but being able to verify all points of data on a chain. Including the coin issuer, purchase conditions, currency used to purchase the same and “chain of title” downstream. If you are confused by this already, you should not be engaged in an ICO right now.Not all of these models or even the ICOs that use them are scams.

Add cannabis to this recipe, and every bank in Germany, even the one at the moment who is still more or less openly participating in ICOs, if not the rest of the European financial community, will probably walk. Even if you reach your “hard cap” (the maximum amount you hope to raise) that might be in the tens if not hundreds of millions of euros. In that case, it will probably be even harder to find a bank to accept your business. Worse, you may never raise the amount you hope for. At that point, you cannot go back to traditional venture capitalists – or anyone else – for more money. You are done. You must start over from scratch. If there was an asset of any kind involved (including a license to do business) legally, everyone who holds a coin owns a piece of it. See securities law. This is precisely why you can never raise money again against that asset or with the corporate entity that owns it. Or at least not without a lot of legal fees or begging your peeved investors for more money. Legally, at that point, they could require you to sell all assets associated with the corporate entity holding the ICO. And they probably would. For investors that is the best-case scenario. ICOs for concepts with no assets or strategic partnerships in place at the time of the “token sale,” create many lose-all scenarios for investors.

There are many pitfalls to this world – and not just from the cannabis side.Issuing a “token” that someone has to pay for that acts like cash (even if to buy goods and services in the future from other members of the ecosystem and social community that crypto coins create) that also is vulnerable to market pricing, is another quagmire. In fact, it might be, beyond any techno or financial queasiness about blockchain, the biggest reason that this industry should look, and with considerable caution, at all tokenized and ICO models that also premise their worth on the idea that such coins will inevitably increase in worth over time. There is also anti-cartel, monopoly and market discrimination to consider.

Not all of these models or even the ICOs that use them are scams. There are and will be valuable alt currencies and tokens in the future (even without a cash value assigned). All of the top start-ups in the current ICO space, in fact, are finding unique ways to create a real alternative currency with values attached that are indisputable. And not all of them will succeed.

However, that is not true of the cannabis business at this juncture. The plant, much like cryptocurrency and beyond that, blockchain itself, has not reached mainstream status yet – starting with market economics and regulation that is already international. A pot-based coin, no matter where it is issued and by whom (including a federal government), would run into multiple issues with valuation just because the price of cannabis itself right now is so volatile, not to mention unevenly priced thanks to jurisdictional restrictions and barriers. For that reason, there is no way to issue a “cannabis coin” with global relevance, much less global value.

And that, of course, is beyond the issue of subsequently selling those coins on exchanges that have been repeatedly hacked, fail to give customers access to their accounts, or are, in the case of China, banned outright (which also deemed ICOs illegal last September).

There are many pitfalls to this world – and not just from the cannabis side. Part III of this series will look at some of the biggest opportunities when cannabis integrates with the DLT (distributed ledger technology).

March 14, 2018

Iowa’s Medical CBD Program Gets Tracking System

By Aaron G. Biros

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BioMauris, LLC became the 5^th company in the United States to win a state contract for a seed-to-sale platform today. BioMauris is a technology company that manages product tracking, fulfillment and distribution with a focus on the healthcare market. According to a press release, the company announced today that the state of Iowa selected BioMauris to manage their tracking system for the medical cannabidiol (CBD) program.

That program’s contract includes inventory tracking, medical cannabidiol sales and patient and caregiver registration. In 2014, Iowa’s Medical Cannabidiol Act was signed into law. Three years later, in May of 2017, Governor Terry Branstad expanded the state’s program, including manufacture and dispensing in the previous legislation. On December 1^st, 2018, Iowa expects sales to begin and fully implement the program.

This is BioMauris’ first state contract in the cannabis industry. According to the press release, BioMauris bases their platform on Salesforce for point of sale, tracking, customer loyalty and distribution services in the healthcare sector. The company says they use Salesforce because it is extremely customizable and secure.

According to Erik Emerson, founder and president of BioMauris, they’re poised to deliver on this front, given their experience in other industries. “Our team has extensive history in the pharmaceutical business, and therefore has a unique appreciation for data integrity and security,” says Emerson. “Additionally, we fundamentally believe the opportunity to track patient progress and associate the benefits received with the products used, is an incredible opportunity for the cannabis industry.” BioMauris has worked with clients on similar projects in the healthcare space for some time.

The company touts their platform as fully PCI-DSS and HIPAA compliant, allowing them to process payments and protect sensitive patient information. “Our patented technology, makes this not only possible, but simple for all users,” says Emerson. “We are excited to bring our product to the great state of Iowa and look forward to a long partnership with them. We believe strongly in what Iowa is attempting to do with their program and believe it is a perfect fit with our strategy for the cannabis industry.”

March 14, 2018

The Global Price of Cannabis

By Marguerite Arnold

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Cannabis pricing, globally, is a topic that is going to remain heated if not highly fluid for some time to come. Why? Government regulation (or lack thereof), compliance and even transport along with different models for commerce and consumption are creating an odd and absolutely uneven map of commodity pricing. We live in a world where accurate information is hard to come by. Even from ostensibly “official” sources that track operational markets. Black or legit.

It may sound complex today but it used to be a lot harder. As of just 2014, the UN’s Office of Drug Control listed the price of a gram of (black market) cannabis in Lichtenstein at $1,020 (as reported by a bemused Business Insider). While this could have been a simple matter of misunderstanding that Europeans frequently use commas rather than periods as decimal points in numbers, the fact that this was later corrected to $10.13 suggests human error in transcription rather than reporting. And the world has certainly changed since then.

Yet with no international legal marketplace or even platform yet in existence to track the global price of legal cannabis in different jurisdictions, this is the kind of issue that faces not only those in the industry but those trying to analyze it.

That said, there are beginning to be data points for those who are interested and those who must have this information for professional reasons. Here is a break-down of regional (legal) prices, per gram from a selection of sources generally considered fairly accurate. This is also made a bit more difficult by the difference in measurement systems and currency fluctuations. For ease of reference, these figures are in grams and U.S. dollars. An ounce is about 28 grams.

Medical grade cannabis also means different things in different markets. Outside the U.S., in Canada and the EU in particular, medical grade cannabis must meet a certification process that adds to the cost of production considerably. Certainly in comparison with outdoor grows. It is still, for the most part, imported, from either Canada or Holland, although look for that to start changing this year as domestic cultivation in multiple countries finally gets seriously underway.

The U.S.

Pricing really depends on where you are. It is also dropping fairly dramatically in established markets. The most recent example of this is Oregon – which has seen its higher-than-normal state retail market begin to normalize with California, Washington and Colorado. This is the price of establishing regulatory schemes on a non-federal level. That said, the competition is so extreme at the moment that Oregon, in particular, is a buyer’s market, with recently reported prices as low as $1 and change for a gram.

Retail pricing, in particular, will remain all over the place on a national level, especially given the amount of local competition between dispensaries underway. On average, however, medical grade-ish cannabis runs between $6-30 a gram, retail.

According to the website Cannabis Benchmarks, which tracks U.S. wholesale prices, the domestic spot index of wholesale cannabis was at $1,292 per pound at the end of January. Or about $5 per gram.The theory that the legit market has to price the black market out of existence is unpopular with those who want to collect more taxes from rec sales.

Nationally, at the moment, uncertainty over how the new post-Cole Memo world will play out, plus oversupply in certain markets, is creating strange pricing. Note to consumers, particularly in recreational markets: There are deals to be had.

Canada

This market is interesting for several reasons. The first is that several of the regional governments are considering establishing a Canadian $10 per gram price for the recreational market. Medical grade runs about $8 at the moment in local currency. That means, with a 20% differential in current f/x rates, a recreational gram will be set at USD $8 and a medical gram at about $6. That said, the theory that the legit market has to price the black market out of existence is unpopular with those who want to collect more taxes from rec sales.

Theories abound about the future of recreational pricing, but for the moment, a great deal of supply and new producers will keep prices low at least through 2019. After that? It is impossible to even guess. At that point, Canadian producers will still be supplying at least German medical patients with some of their imported bud. Regardless, the country will continue to play an important role in global pricing – even if it is to set a recreational and medical standard that plays out in markets already from the EU to Australia.

Israel

Like Canada’s market, although for different reasons, the Israeli official price on legal cannabis is absolutely constant. It is set by government policy. Those who have the drug legally, in other words with a doctor’s prescription, pay about $100 for a month’s supply. That amount on average is about 28 grams. That means that a medical gram in Israel will set you back about $3.50 per. U.S. not Canadian.

Europe

Price deltas here are the most impacted by changing national laws, standards and medical legalization. There are only two semi-legitimate recreational markets at the moment that include THC. Those are Holland and Spain. In Holland, via the coffee shops, the low-end of passable bud starts at between $12-15 per gram and goes up to about $30 for the really exotic breeds. This being Holland, they exist and are obtainable. In Spain, add the cost of joining a social club (about $50), but in general, the cost of a gram is about $10.Price deltas here are the most impacted by changing national laws, standards and medical legalization.

Medical markets in places like Germany are still skewed by integration of the drug into the country’s healthcare system and the fact that it is still all imported. The horror stories are real here. Patients must pay out-of-pocket right now for cannabis flower that is also being pre-ground by local apothekes for an additional price per gram that is eye-wincingly high. However, once the price and supply normalize, look for a medical standard here of about $10 for a month’s supply. That will be about 28 grams too.

Germany, in other words, will eventually be one of the cheapest markets for patients after reimbursement by insurance. That shapes up to be about $0.50 per gram at point of sale. It could be far less for those who are able to obtain authorization for higher amounts up to five ounces per month. The flat fee stays the same. Do the math. That works out to some pretty cheap (high grade) medical relief.

Black market cannabis and hash, which is also far more common in Europe than the U.S. at least, is fairly widely available for between $12 and $20 a gram.

The rise of cannabis production in Eastern Europe and the Baltics (which is also still largely pending and based on ongoing government talks and emerging distribution and cultivation agreements) will also dramatically drive down the cost of legal cannabis in the EU within the next several years. Production in this part of the world, along with Greece, may well also source rec markets all over the continent once that happens.

Africa & Central and South America

While the African cannabis trade has yet to break out – even in the media much of yet, there is definitely something green growing in several African countries including South Africa and Ethiopia. That trade unlike most of what is going on in South America with the possible exception of Uruguay is already looking for export opportunities globally. With African cannabis going for less than a buck a gram in most places (as in about a fifth of even that), look for certified African medical cannabis in select Western markets where price is going to be a major issue. Think medical standards. On the South American front, prices are equally low. However, remember that these are not regulated markets yet. And domestic government standards, starting with GMP and both indoor and outdoor grow requirements are basically non-existent. Growers who want to export to higher regulated markets are planning accordingly.

Assorted Outliers

It goes without saying that in places where cannabis is both illegal and carries the death penalty or other harsh penal retaliation, that the price is not only much higher, but the source is black market. In the UAE for example, a gram will set you back well over $100.

March 13, 2018

Colorado Debuts Universal THC Symbol

By Aaron G. Biros

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Yesterday, the Colorado Marijuana Enforcement Division issued a bulletin unveiling their universal symbol for all cannabis products. According to the bulletin, the State Licensing Authority adopts the universal symbol for all packaging, labeling and on-product marking for medical and recreational cannabis products, effective immediately.

“The State Licensing Authority’s adoption of a Single Universal Symbol is intended to further protect public health and safety by enhancing consumers’ ability to identify products containing marijuana,” reads the bulletin, signed by James Burack, director of the Marijuana Enforcement Division. “Further, by eliminating distinctions between Universal Symbols for medical and retail marijuana, the Single Universal Symbol works to simplify and improve compliance regarding packaging, labeling, and product marking requirements.”

On January 1^st, 2019, use of the universal symbol on packaging will be mandatory for all products, with a few exceptions for medical center sales with existing inventory. There is an optional use period that lasts until the end of 2018 where producers and retailers can use the previous universal symbols. After July 1^st, 2019, every product sold in the state of Colorado must have the updated universal symbols, according to the bulletin.

On packaging and labeling, the red and white symbol is required whereas on single servings, the symbol must be on one side but doesn’t need to have the colors.

Back in 2016, Colorado began using a THC universal symbol, requiring it on infused product servings, essentially as a warning symbol on edibles. With this newly implemented rule, all products, including packaging for flower and concentrates, must have the symbol on it. Licensees are encouraged to visit the MED’s website for more information.