On December 7th, 374 Labs received ISO 17025 accreditation, becoming the first in Nevada to do so. The laboratory, based in Sparks, Nevada, is state-certified and now the only ISO 17025 accredited lab in the state, according to a press release. The laboratory is a member in both the Association of Commercial Cannabis Laboratories (ACCL) and the Nevada Cannabis Laboratory Association (NVCLA).
Managing Partner Alec Garcia at the LCMS/MS
“As Nevada transitions into an adult-use cannabis market, it’s very important that the state’s cannabis testing laboratories are held to the highest standards – and ISO 17025 is a requirement of top testing laboratories in all industries from biotech to forensics in most major countries,” says Dr. Jeff Angermann, assistant professor in the University of Nevada, Reno’s School of Community Health Sciences.
Laboratory Technician Bevan Meade working on sample preparation.
According to the release, 374 Labs was a driving force behind Nevada’s round robin cannabis lab testing program. That program, administered by the Nevada Division of Public and Behavioral Health (DPBH) and the Nevada Department of Agriculture (NDA), sends cannabis samples to each state-certified cannabis lab for a full analysis, measuring the consistency in test results across labs. “In other states proficiency involves testing pre-prepared, purified samples and neglects the challenges of coaxing out delicate analytes from the complex array of compounds found in actual marijuana,” says Laboratory Director Jason Strull. “I commend the DPBH and NDA for facilitating such an advanced quality program.”
Also notable is the announcing of their partnership with Clean Green Certified, a third-party certification (based on USDA organic certification) for sustainable, organically based cannabis cultivation. “Nevada allows certain levels of pesticides like Myclobutanil on its certified marijuana, so we wanted a way for patients and consumers to able to distinguish marijuana that is grown using organic methods,” said Laboratory Director Jason Strull. According to Michael Seibert, managing member of 374 Labs, they have already started performing inspections for the third-party certification and the first facility inspected was Silver State Trading in Sparks, Nevada (certified for both production and cultivation).
Update: With 100% reporting (589 of 589 precincts), voters in Maine passed Question 1, legalizing recreational cannabis by a very narrow margin of 50.2% to 49.8% (378,288 in favor and 375,668 against is a margin of only 2,620 votes)
Voters in California, Massachusetts, Maine and Nevada passed ballot initiatives legalizing the recreational use of cannabis, creating huge new markets for the cannabis industry overnight. Voters in North Dakota, Florida, Montana and Arkansas passed ballot initiatives to legalize forms of medical cannabis. Voters by a margin of 52.2% to 47.8% rejected Arizona’s Proposition 205, which would have legalized recreational cannabis.
With 100% of the votes in for Maine’s Question 1, voters narrowly passed legalizing recreational cannabis, the polls show it won by a very slim margin, less than 3,000 votes.
New Frontier Data and Arcview Market Research released an Election Day update to their growth projections for the cannabis industry by 2020. The release projects: “The legalization of cannabis in California, Massachusetts, Nevada, Florida, Arkansas and North Dakota will result in new markets that account for $7.1 billion in sales by 2020. We project the overall U.S. cannabis market will exceed $20.9 billion by 2020.” Those numbers include overall cannabis sales and assume the markets are all fully operational by 2018.
Giadha DeCarcer, founder and CEO of New Frontier (photo credit: Frontierfinancials.com)
According to Giadha DeCarcer, founder and chief executive officer of New Frontier, there is overwhelming support for medical cannabis and a majority of Americans are in favor of legalizing recreational cannabis as well. “The ten initiatives on the ballot reflect the accelerating public debate on legal cannabis access,” says DeCarcer. “The passage of California’s adult use measure and Florida’s medical initiative expand legal access into two of the country’s most populous states.” The market potential is notably enormous in California, it currently being the 6th largest economy in the world. “Additionally, the passage of the measure in Massachusetts opens the first adult use market in the Northeast extending the reach of legal adult use access from coast to coast,” says DeCarcer. “The passage of the measures in Arkansas and North Dakota shows that public support on this issue is not solely confined to urban, liberal markets but extends into conservative rural states as well.”
According to the release, by 2020 California could reach a total market size of $7.6B and Massachusetts could grow to $1.1B. Massachusetts being the first mover in the Northeast to legalize recreational cannabis will be watched very closely by a number of surrounding states that appeared bullish on cannabis legalization previously.
Leslie Bocskor, president and founder of Electrum Partners
Leslie Bocskor, president and founder of Electrum Partners, believes the Election Day results will bring an influx of investing opportunities to the industry. “We are going to see a diverse approach from the irrationally exuberant to the sophisticated and experienced investor and entrepreneur getting involved, creating businesses and investing in the industry that will create innovation, jobs, wealth and tax revenue far beyond the consensus expectations,” says Bocksor. “The cannabis industry is more than one industry; it is an entire ecosystem, impacting so many verticals, such as agriculture, industrial chemicals from hemp, pharmaceuticals, nutraceuticals and more. We see the funding of innovation that might have been absent without the velocity and heft that has come from this phenomenon,” adds Bocksor. As these newly legalized markets begin to launch, it will require a considerable amount of time to see the industry flesh out in each new state.
Tom Lohdan, Flickr
Donald Trump winning the presidential election and the GOP retaining control over the House and Senate could mean a lot of uncertainties for the future of the cannabis industry on a national scale. President-elect Trump has previously flip-flopped on the issue of cannabis legalization, but has said in the past he favors leaving the issue of medical use up to the states, advocating for access to medical cannabis, while recently saying he opposes regulating cannabis for adult use, according to the Marijuana Policy Project. The MPP gave him a C+ grade for his views toward cannabis.
On The O’Reilly Factor in February 2016, Trump told the conservative political commentator that he supports medical cannabis while opposing the recreational use. “I’m in favor of it [access to medical cannabis] a hundred percent. But what you are talking about [recreational use], perhaps not. It’s causing a lot of problems out there [in Colorado],” says Trump. It is still unclear at this time exactly what Trump’s policy will be for the now 28 states that have some form of legal cannabis.
Aaron Smith, executive director of NCIA
Aaron Smith, executive director of the National Cannabis Industry Association (NCIA), appeared optimistic regarding the outcomes of Election Day. “More than 16 million voters, including in two of the three most populated states in the nation, chose legal, regulated cannabis programs that promote safety, boost the economy, help sick patients and address social injustices,” says Smith. In the press release, the NCIA spelled out their priorities for congressional action on cannabis policy: Opening up bank access for state-compliant cannabis businesses, ending the effects of federal tax code Section 280E on cannabis businesses and removing cannabis from the Controlled Substances Act via descheduling. “Last night’s results send a simple message – the tipping point has come,” says Smith.
Last week, Pennsylvania Department of Health Secretary Dr. Karen Murphy announced the formation of temporary regulations for cannabis growers and processors in the state, according to a press release. Those temporary rules were published on Saturday, October 29. Secretary Murphy asked for public comment on developing regulations for dispensaries as well.
The PA Department of Health published the new set of temporary regulations this past Saturday, outlining “the financial, legal and operational requirements needed by an individual to be considered for a grower/processor permit, as well as where the facilities can be located.” The regulations also discuss tracking systems, equipment maintenance, safety issues, disposal of cannabis, tax reporting, pesticides, recalls and insurance requirements. “One of our biggest accomplishments to date is the development of temporary regulations for marijuana growers and processors,” says Secretary Murphy. “We received nearly 1,000 comments from members of the community, the industry and our legislative partners.”
The general provisions published on Saturday outline the details of the application process, fees, inspections, reporting, advertising and issues surrounding locations and zoning. The temporary regulations for growers and processors delve into the minutia of regulatory compliance for a variety of issues: including security, storage, maintenance, transportation, tracking, disposal, recall, pesticides and packaging and safety requirements. A list of pesticides permitted for use can also be found at the bottom of the rules.
PA Department of Health Secretary Dr. Karen Murphy
The document discusses the regulations for performing voluntary and mandatory recalls in great detail. It requires thorough documentation and standard operating procedures for the disposal of contaminated products, cooperation with the Department of Health and appropriate communications with those affected by the recall.
The department has yet to release temporary regulations for laboratories and dispensaries, but hopes to do so before the end of the year. “I am encouraging the public – and specifically the dispensary community – to review the temporary regulations and provide us with their feedback,” says Secretary Murphy. “The final temporary regulations for dispensaries will be published in the Pennsylvania Bulletin by the end of the year.”
Since Governor Tom Wolf signed the medical cannabis program bill into law in April 2016, the state has made considerable progress to develop the program, including setting up a physician workgroup, public surveys for developing temporary rules and a request for information for electronic tracking IT solutions. The PA Department of Health expects to implement the program fully in the next 18 to 24 months.
Even though half of U.S. states and the District of Colombia now permit the possession of medical or recreational cannabis, state regulatory bodies differ greatly in their approaches to managing our industry. In Washington, anyone over the age of 21 can legally possess one ounce of usable cannabis and/or seven grams of concentrate. In Minnesota, patients are only allowed to purchase non-smokable cannabis in pill, liquid or oil form.
Given these substantial differences, it is no surprise that the application process to open a dispensary or cultivation facility also varies from state to state. The question I am most often asked (and catch myself mulling over late at night) is what can applicants do to ensure their success, regardless of where they are applying?
Recently we helped a client secure one of the first 15 licenses issued to grow medical cannabis in Maryland. The Maryland application process was particularly unique because most of the applicants had political or law-enforcement ties, or were connected to successful out-of-state growers. That experience, along with our work in places like Arizona, Colorado and Florida, has shown me the importance of teamwork, diversity and security in developing a winning application.
So here are my suggestions for ensuring a successful submission, regardless of which state you are operating in:
Build the Right Team. My dad likes to say, “Use the right tool for the right job.” I think the same is true about creating the team for your application. Do not assume one or two people will be able to fill all of the required roles. You will need experts in a range of different areas including medicine, pharmacology, capital investment, cultivation, real estate, security and law.
Focus on Diversity. I think one of the reasons we have been successful in helping clients secure applications (we are six for six, in six different states) is our commitment to gender, racial and even geographic diversity. For example, we recently helped a client secure a license in an economically underdeveloped area. I think our choice to headquarter the new business outside of the metropolitan corridor was at least partially responsible for our success.
The Devil is in the Details. According to ArcView Market Research, the cannabis industry is expected to be worth $23 billion by 2020. If you want to be one of the organizations selected by your state to sell cannabis, you need to have your act together. Most applications ask incredibly detailed questions. Therefore it is essential that you answer them thoroughly and accurately. All answers should be in compliance with your state’s regulations.
Put Safety First. You will need a comprehensive plan that takes all aspects of security into account. This includes everything from hiring security guards to purchasing cameras, and implementing internal anti-theft procedures. Regardless of the size of your operation, safety should be a primary consideration.
Secure Funding. Successful cannabis businesses require capital. It’s important to be realistic about the amount of money you will need to have on hand. Application costs typically range from $500,000 to $1 million. This will cover things like hiring an architect or leasing land. Ideally, your organization will have another $5 to $10 million or more available to start your project once you’ve been approved so that you can quickly become operational.
Connect With Your Community. It is essential to consider the impact of your business on the community. Being a good corporate citizen means being transparent and engaging in a two-way dialogue with neighbors, government officials and patients. I strongly recommend that my clients develop a comprehensive community outreach plan that designates which organizations they plan to work with, (hospitals or universities, for example) and what the nature of those partnerships will be.
Cannabis processors and dispensaries in Colorado were hit with new rule changes over the weekend, going into effect on October 1st. The rule changes affect those producing edibles and dispensaries that sell retail and medical cannabis products.
The universal symbol required on all cannabis products in Colorado
As of October 1st, all cannabis edibles must be marked with the universal THC symbol, according to a bulletin posted by the Colorado Department of Revenue’s Marijuana Enforcement Division (MED). Both medical and retail cannabis products require labeling that includes a potency statement and a contaminant testing statement.
The rules also set “sales equivalency requirements” which essentially means a resident or non-resident at least 21 years of age can purchase up to one ounce of cannabis flower or up to 80 ten-milligram servings of THC or 8 grams of concentrate, according to the MED. The packaging must also include: “Contains Marijuana. Keep out of the reach of children.”
The universal symbol printed on products from Love’s Oven.
It seems that cannabis edible manufacturers have two clear choices for complying with the new rule requiring the THC symbol: They can use a mold to imprint the symbol on their product or they can use edible ink. Peggy Moore, board chair of the Cannabis Business Alliance and owner of Love’s Oven, a Denver-based manufacturer of cannabis baked goods, uses edible ink to mark each individual serving. The printer uses similar technology and ink used to print on m&m’s, according to Moore. “Baked goods are difficult to find a solution for marking them because they are a porous product, not smooth.” Complying with the new rules almost certainly means added costs for processors and edibles producers.
Moore said she updated all of their labels to include the appropriate information in compliance with the rules. “In terms of regulatory compliance, there have been some disparities for labeling and testing requirements between medical and retail cannabis products, however they are coming into alignment now,” says Moore. “The testing statement rule has been in place for some time on the retail side, but now we are seeing this aligned with both medical and retail markets.” This new rule change could be seen as a baby step in making the different markets’ regulations more consistent.
California’s tradition of social and political experimentation has made it the national leader in areas ranging from environmentalism and social justice to technology. Now it is poised to make the same far-reaching transformations in the cannabis industry.
As one of the world’s top ten economies and the nation’s most populated state (having a population of 38 million), California could propel the decriminalized recreational cannabis industry to $6.5 billion in 2020, according to a report by ArcView Group and New Frontier.
At the same time, California is in the process of moving from state to local zoning control, as far as issuing the OK to become licensed, effective Jan. 18, 2018. This means collectives and dispensaries have to obtain local approval before they receive a state license. It also puts greater pressure on gray market operations to become licensed.
On the regulatory front, the state is also heading toward a historic vote in November 2016 in the form of Proposition 64. This will open up the customer base to all Californians. It has a similar licensing path as the medical regulations the Governor signed last year, except it allows vertical integration between growers and dispensaries, which is not allowed under the medical regulations, except in very limited circumstances.
Credit: cannabisbenchmarks.com
“My bet is the demand will outweigh the supply for a while and the legal cannabis businesses that are licensed by the locals and have their supply chain in place will end up profiting,” says Andrew Hay of Frontera Accounting, a cannabis-focused CPA firm based in California under the umbrella of the Frontera business group.
A Huge Market Awaits
If the Adult Use of Marijuana Act passes and is enacted by 2018, the state’s legal cannabis sales are projected to hit $1.6 billion in their first year, the ArcView and New Frontier market report said. Even without the new expanded legislation and working amid a fractured medical cannabis regulatory environment, California now accounts for about half of all the legal cannabis sales nationwide, according to the report.
At the same time, the state is well positioned to capitalize on new technology and financing from Silicon Valley in terms of human talent, money and the applications of new technology in both the medical and recreational sectors. One driving force will come from the Adult Use of Marijuana Act, which mandates that 10 percent of sales tax collected on cannabis sales be re-directed towards medical research and drug abuse programs.
In addition, according to Marijuana Politics, the expected tax windfall is slated to be divided up among a variety of programs: $10 million to public universities, $10 million to business and economic development, $3 million to California Highway Patrol and $2 million for medical cannabis research at UC San Diego. The remainder will be divided between youth drug education and prevention (60%), environmental protection (20%) and law enforcement (20%).
This flow of new funds is expected to propel research into biomedical and applied research, as well as nutraceuticals, or products derived from food sources with extra health benefits in addition to the basic nutritional value found in foods. The driving new ingredients in these products will be derived from cannabis.
Consolidating the Recreational and Medical Markets
Californians will vote in November 2016 to legalize the sale of recreational cannabis. This vote will have serious repercussions since it could mean that the delineation between medical and recreational markets will disappear.
“Should California vote to legalize recreational use this November, we expect implementation of a combined regulated market as soon as 2018,” says Matt Karnes, founder of GreenWave Advisors. Karnes says a merged California market is significant, not only because of its sheer size (it represents about 55% of the U.S. market), but also because it “would mark the first state to implement regulations for a fully legal market without initial oversight of medical use purchases. This could serve as a catalyst for similar action in Nevada, Arizona, Massachusetts and Maine which will also vote to fully legalize cannabis this November.”
In the report, “Mid Year Update: The Metamorphosis of the U.S. Marijuana Market Begins,” the firm said it projects cannabis sales in the U.S. to hit $6.5 billion for 2016. The firm forecasts that by 2021, revenues should reach about $30 billion. This assumes that marijuana will be legal in all 50 states to various degrees. The firm also notes that this year’s election choices can potentially generate $4.2 billion in incremental retail revenues by 2018 and $5.8 billion by 2021.
The Impact on Branding, Music and Culture
As the nation’s culture manufacturing center for films, TV and music, the cannabis business is also expected to shape artistic direction for years to come. Jeff Welsh is a partner at Frontera, a business group that holds a suite of services including the Frontera Law Group, Frontera Advisors, Frontera Accounting and Frontera Entertainment, which is headquartered in Sherman Oaks with a specific focus on the cannabis industry. Welsh says he sees more partnerships between the cannabis industry and mainstream entertainment outlets. Welsh recently signed Chris Sayegh, the herbal chef who uses liquid THC to create elegant restaurant-quality food, in a deal with the United Talent Agency. This marks a cultural breakthrough that links the cannabis and culinary industries.
Because Los Angeles is the largest market, this cultural nexus is expected to contribute more new alliances between celebrity branding and cannabis products.
Luke Stanton, founder and managing partner of Frontera, also said less stringent regulations in the cannabis legal environment could find their way into the regulations and laws of other states that often adopt California laws as templates for their own state. “We have seen this happen in other areas, such as environmental and criminal justice, so it would not be surprising to see our state regulations and policies being enacted in states nationwide, and even in some countries outside of the U.S.,” Stanton says.
California has also been the site of innovative marketing efforts between cannabis patients and growers. The Emerald Exchange held in Malibu, was the first event in cannabis that allowed a direct conversation between Northern California cultivators and the Southern California patient community. According to Michael Katz of Evoxe Laboratories, a California cannabis product manufacturer, “Often the farmers don’t have a chance to really engage with patients, and we wanted everyone to be able to come together, discuss practices, provide information and ultimately support the entire ecosystem of the cannabis community.”
Caveats for Investors
While the California market looks very attractive, it may be the siren’s call for investors until issues related to finding solid companies and taxation are settled.
Since more operations will have to become fully compliant with state regulations, these businesses will face more significant expenses to meet security, taxes, licensing fees, accounting and reporting operations requirements. This could drive smaller operations out of business or force them to become more efficient.
In addition, California’s huge potential and changing regulatory environment is attracting large growers into the state that will compete with smaller, established operations. According to Jonathan Rubin, chief executive officer of Cannabis Benchmarks, these regulations affecting commercial growing vary greatly by municipality. For instance, Mendocino and Humboldt counties have enacted measures to protect local growers, while other counties have not, Rubin says.
Credit: cannabisbenchmarks.com
In addition, cannabis wholesale prices have been falling due to changes in cultivation methods and variations in supply.
Andrew Hay, a CPA at Frontera Accounting, believes investors should make sure there is a solid plan behind any cannabis company investment. “I’ve seen significant money thrown behind ‘cannabis brands’ with no substance,” Hay says.
“In these cases, the winners are the growers, manufacturers, distributors and dispensaries that are licensed (or are in the process of getting licensed), who pay their taxes and have a successful track record. I wouldn’t invest until you see the underlying operational structure, their tax/regulatory compliance and financials that prove there have been sales,” he says.
Another major problem for investors lies in the IRS accounting regulations. “The biggest hurdle I see facing the California cannabis business is the IRS / IRC 280E, which only allows cost of goods sold deductions. Every cannabis business should be planning their operations around IRC 280E, as there is no way to legitimately survive in the cannabis industry without doing so,” according to Hay.
“IRC 280E is here to stay regardless of California legalization. It is up to the Federal government to fix this issue, which I don’t see happening any time soon. Every cannabis business should hire a CPA and business attorney that work well together to devise a cost accounting strategy to minimize IRC 280E and its impact. Without this, an investor’s profits can go up in smoke to the IRS,” Hay says.
David Goldstein, co-founder and chief executive officer of PotBotics, launched a medical cannabis recommendation engine called PotBot with the goal to better inform patients to target their conditions with more accurate recommendations based on scientific research. “This is a tool to help move the market away from the thousands of strain names that are mainly just marketing or branding indicators,” says Goldstein. The medical application is designed to inform patients on peer-reviewed data, research on the treatment of their ailments with cannabis and the specific cannabinoids that are necessary for treating their condition. They began development on PotBot in October of 2014, launching the beta version to 400 users in November of 2015. On April 20th, 2016, Goldstein launched officially in the Apple Store, and the program will be available on Android in July.
David Goldstein (left) alongside co-founder, Baruch Goldstein (right)
Rather than focusing on strain names, PotBot focuses on the cannabinoid values to help patients gain an understanding of the correlation between which compounds might best target their condition. “This is a great tool for patients trying to familiarize themselves with what strains might work best,” says Goldstein. “For example, insomnia patients generally need cannabis with higher CBN levels, so we first educate the patient on cannabinoid ranges to shoot for and what strains might help. PotBot would recommend the strain Purple Urple because it is an indica found to have higher CBN values,” adds Goldstein. The program goes into great detail with the patient’s preferences including everything down to consumption methods so they know why it might recommend certain strains.
A screenshot showing a recommended cannabinoid ratio for a patient
The recommendation tool is accessible via kiosks at dispensaries, on a desktop version for the computer as well as on the Apple Store for iPads and iPhones. “I do not see it as a way of replacing budtenders, rather supplementing them with knowledge,” says Goldstein. PotBot is designed as a tool to supplement the budtender’s understanding of cannabis, so the budtender does not need to know everything off the top of their head or recommend strains based on anecdotal information, according to Goldstein.
Goldstein’s team at PotBotics performed extensive research prior to launching PotBot, spending two years doing strain testing to develop the program. “There is currently no regulatory body [for strain classification] so we took it upon ourselves to work with the best testing laboratories for truly robust analyses and properly vetted growers to get the most valid data,” says Goldstein. “The current strain classification system and nomenclature is rather unscientific so we focus on cannabinoid values and soon we will be able to incorporate terpene profiles in the recommendation.” Moving away from the common focus on taste, smell and other qualitative values, they focus on medical attributes of cannabinoid profiles because they have the most peer-reviewed research available today.
As an OEM, the company designed the tool to work with each dispensary’s inventory, to provide recommendations for strains that a patient can access on site, however anyone can access the recommendation tool for free at PotBot.com. Goldstein’s company and their mission represent an important development in the cannabis industry; this could begin a key transition from thousands of understudied strain names to a more scientific and calculated method to treating patients’ conditions with cannabis.
Derek Peterson, chief executive officer of Terra Tech
Terra Tech, with the recent acquisition of Blum, a dispensary in Oakland, and the line of concentrates, IVXX, is sweeping the cannabis industry by setting standards for safety and quality. Terra Tech, publicly traded in theOver-The-Counter market, is well known as an agricultural company, with the subsidiary brand, Edible Garden, selling produce to Whole Foods, Wal-Mart and Kroger’s. In December of last year, we covered Terra Tech’s entrance into the cannabis marketplace and their experience with large-scale, sustainable agriculture. We sit down with Derek Peterson, chief executive officer of Terra Tech, to get an update on their progress and quality controls.
CannabisIndustryJournal: In January, Terra Tech announced revenue guidance of $20-22 million for 2016. Can you share some of your strategy going forward to meet your goals?
Terra Tech is taking organic and GFSI-certified agricultural practices to growing cannabis
Derek Peterson: We have always played both a long game as well as a short game, meaning while we are building our longer term business, like in Nevada, we are also focusing on short term accretive acquisitions, like we did with Blum in Oakland. We want to make sure we capture short-term revenue growth while we plan our future revenue production. We feel confident about achieving those results.
CIJ: How big of a role does the acquisition of Blum and IVXX brand expansion play in meeting those goals?
The Oakland location of Blum dispensary
Derek: Blum is a significant factor even though we are only capturing three quarters of revenue considering we closed the deal on March 31st of this year. So for the full year of 2017 we will have growth from this level considering we will be able to report a full year of Blum revenue. IVXX presents us with the best opportunity for growth in the coming years. As the market in California and Nevada grows we can continue to expand our IVXX footprint throughout the state. Being able to wholesale to thousands of other retail facilities affords us a significant opportunity to grow our sales.
CIJ: How do you think the brand of Edible Garden positions you well for expansion in the cannabis industry?
Produce ready for distribution at Edible Garden facility in Belvidere, New Jersey
Derek: One of the reasons we were so successful in the Nevada market was because regulators and legislators felt a high degree of confidence in our abilities considering we are USDA organic, Kosher and GFSI-certified. Our traditional agricultural experience has been very synergistic with our cannabis division from both an optics and operational perspective.
CIJ: Could you give us an update on progress in Medifarm LLC in Nevada? And on your distribution plan for IVXX in California?
IVXX concentrates
Derek: We are continuing to expand our IVXX line throughout the state and increasing our sales force. In addition we will continue to develop new products to distribute into our existing supply chain, like we just did with our new pre filled cartridge line.
We are opening our Decatur location in Las Vegas in early July and Reno and Desert Inn towards the end of August. Our cultivation and extraction facilities should be complete no later than January 2017. We will have our entire infrastructure in place if the recreational bill passes in Nevada this November.
Blum Las Vegas location will open in July
CIJ: Tell us about the role of laboratory testing in your business.
Derek: Laboratories play a significant role, as they are becoming a mandated step in most new legislation around the company. Independent lab testing is extremely important to maintain safe access for consumers and patients. We work primarily with Steep Hill Labs and CW analytics.
CIJ: Can you expand on your integrated pest management and your growing practices?
Platinum Cookies ready for packaging and labelling
Derek: Well we cannot say organic, however we do cultivate all naturally. We also cultivate traditional produce that we sell to major retailers. We are USDA organic-certified and we implement similar processes in our cannabis cultivation. Pest control is extremely challenging for any farmer but we rely primarily on bio control, meaning the good bugs eat the bad bugs. This has been very effective for us in the cultivation of all our products.
CIJ: How is your business different from the slew of other dispensaries and growers in California?
Consistency in quality standards requires meticulous SOPs
Derek: Service and consistency; we have over 42,000 registered patients and our operations team has over 19 years of experience in California. One of the reasons we have become one of the largest dispensaries in the state is because of that experience. In addition, consistency is extremely important. Consumers expect the same product in every other business and ours is no different. If they come in for our Platinum Cookies one month and the next month it has different characteristics you are going to lose patient confidence. So in the front of the house, we are focused on pairing patients’ needs with the correct product and in the back of the house we are focused on providing a meticulously cultivated product, produced at the highest standards.
CIJ: Can you delve into some of the processing for concentrates? How do you meet such rigorous quality standards?
Extraction equipment in one of the processing facilities for IVXX
Derek: Through research and development, we have engineered a proprietary process in which our solvent profiles used under our proprietary conditions ensures solvent residual levels which are not detected by instrumentation at 3rd party testing agencies such as Steep Hill Labs. In addition, any good scientific method requires repetition and corroboration of results. In order to accomplish this we also rely on random routine testing in which we send out extracts out to other 3rd party testing labs. Proprietary conditions include, but are not limited to, heat, vacuum, agitation, etc. By utilizing the correct amalgamation of solvent profiles, extraction conditions, purging conditions, as well as rigorous quality control standards, we are able to ensure a product that is void of any residual solvents, without sacrificing potency or identity of the cannabinoids and terpenes. Cannabinoids and terpenes are of chief interest when extracting cannabis for patients so that they have access to these essential oils without any of the actual leaf and bud.
All solvents used are the highest grade available to us, which ensures a truly medical product for the patient. In addition, all of our extraction equipment is routinely cleaned and sterilized using medical grade cleaning agents.
Doctors are still very hesitant to recommend cannabis in medical treatment of their patients. A key aspect missing from the medical cannabis industry is participation from physicians and the medical community. Cannabis’ Schedule I drug status blocks medical research and leaves a stigma in the medical community. Doctors are concerned with the implications of recommending cannabis, the possibility of losing their license to practice and most lack any formal education in prescribing cannabis. The DEA’s recent announcement to consider rescheduling cannabis this year could dramatically impact doctor’s willingness to work with the drug.
The DEA’s plan to release a decision on the matter represents a major shift in attitude toward treating patients with medical cannabis. This could very possibly culminate in the rescheduling of cannabis, which would allow for more medical research, including clinical trials. Dr. Scott Gottlieb, board-certified anesthesiologist and pain management specialist from Pearl River, New York, believes the bigger obstacles for doctors prescribing cannabis include the stigma associated with it, legal concerns and physicians’ lack of education. Dr. Gottlieb has practices in both New York and New Jersey where he recommends patients cannabis. He believes there should be some type of recourse to help physicians circumvent legal issues. “Some of the bigger legal concerns regarding cannabis surround complying with state regulations,” says Gottlieb. “That sort of compliance includes confirming the diagnosis of the patient with thorough documentation, making sure it is an approved condition to treat with cannabis, documenting continued treatment of the illness and clearing the patient of any contraindications.”
Dr. Gottlieb believes it should be a collaborative effort on behalf of states, dispensaries and patients working to help educate doctors on the legal concerns surrounding the recommendation of cannabis. “Physicians are not taught anything in medical school about dosing or the medical effects of cannabis,” says Gottlieb. “With more education we can get rid of the stigma and get physicians aware of the potential benefits for their patients and the ability to control dosage in medication.”
Currently, there is very little communication between doctors and dispensaries in New York. A collaborative effort to educate all stakeholders involved could help get more doctors involved and streamline the entire process. “Doctors want patients to feel comfortable and know what to expect in receiving treatment with cannabis,” continues Gottlieb. “Which will come with a more transparent system, involving patients, doctors and dispensaries in a conversation about education.”
Pointing to the success of doctors actively recommending cannabis could also facilitate doctor participation. “The number one reason why I recommend cannabis is that I have a number of patients that use it to successfully treat their conditions and completely eliminate their opioid regiment,” says Gottlieb. That kind of success in a treatment should grab the attention of physicians as what could possibly be best for their patients. With more education and research, doctors will gradually feel more comfortable recommending cannabis to their patients.
The Supreme Court shut down a lawsuit on Monday brought by two states against Colorado for its recreational cannabis laws. Nebraska and Oklahoma brought the case to the Supreme Court, claiming that the recreational cannabis industry in Colorado is responsible for the illegal exportation of cannabis outside of Colorado. “Colorado has facilitated purchase of marijuana by residents of neighboring states by issuing licenses to an unusually high number of marijuana retailers perched on Colorado’s borders,” the two states told the court in a supplemental brief.
In that brief, the two states argue that Colorado’s cannabis industry led to more cannabis illegally crossing state lines. They argue because of that influx of cannabis, they spend more on law enforcement and state resources, which is a detriment to their citizens. The Supreme Court did not provide an explanation for why they refused to hear the case.
Many view this as a big win for the legal cannabis industry. “The Supreme Court has protected the will of the people today and I believe the court has demonstrated that it understands legal cannabis is a fundamental right,” says Andy Williams, president of Medicine Man, the largest cannabis dispensary in Denver.
Still others see this simply as business as usual. “While I’m pleased to see the Court reject the challenge to Colorado’s cannabis law, this decision isn’t really a win for cannabis advocates- it only maintains the status quo,” says Aaron Herzberg, partner and general counsel at CalCann Holdings, a medical cannabis holding company specializing in real estate and licensing. “We are struggling with diversion in California, so hopefully states will continue to be on track to create a more regulated and taxed environment where cannabis can be manufactured and sold through channels where it is safe and tested,” continues Herzberg.
Adam Koh, chief cultivation officer at Comprehensive Cannabis Consulting (3C), warns that the Court’s denial to hear the case is not necessarily an affirmation of state’s cannabis programs. “It is evident that some diversion is taking place, which of course is against the provisions of the Cole Memorandum,” says Koh. “In order to avoid being implicated in such activities, legally licensed cannabis businesses in Colorado should not take the SCOTUS decision as a signal to relax, but should instead work to make sure that inventory control and record-keeping protocols are in place and even exceed the standards required in state regulations.”
The fact alone that Nebraska and Oklahoma even brought the case to the Supreme Court means that diversion is a major issue facing the cannabis industry. “Only by going above and beyond in terms of compliance will this controversial industry make itself credible in the eyes of its detractors,” says Koh. Some cannabis industry leaders take it upon themselves to help guide rule makers in crafting standards.
Lezli Engelking, founder of the Foundation of Cannabis Unified Standards (FOCUS), believes the Cole Memo is currently the best guidance for states and business owners to follow by the federal government in regards to cannabis. “Gaping holes in cannabis regulations are glaringly identified via the pesticide issues and recalls recently,” says Engelking. “These issues showcase each state being in violation of the Cole Memo’s expectation that they will implement strong and effective regulatory and enforcement systems that address the threat to public safety, public health, and other law enforcement interests.”
The Supreme Court’s denial of the two states’ challenge to Colorado’s cannabis legislation suggests the federal government’s intentional avoidance of involvement in current state cannabis issues. The government’s inaction does not, however, indicate their support.
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