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Adult Use Cannabis Begins in Compassionate Connecticut

By Abraham Finberg, Simon Menkes, Rachel Wright
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On January 10, 2023, Connecticut joined those states in our union that have opened their doors to adult use cannabis sales. Seven dispensaries stepped through those doors and by January 31, Connecticut had recorded $5.1 million in adult use sales, plus an additional $8.2 million in medical sales for a total of $13.3 million.

Like other states now embracing adult use, Connecticut has enacted a strong social equity program, with mixed results so far. Also, perhaps more than any other state, Connecticut has committed to protecting its existing medical cannabis patients and has put in place various mechanisms to guard their access to cannabis.

Slow Roll-Out of Retail Cannabis Licenses

Like other recently-legal states, Connecticut’s rollout of its retail licenses has not been rapid. The state’s initial goal has been to issue twelve retail licenses by lottery, with six reserved for social equity applicants. Also, the eighteen already-operating medical licensees were given the option to upgrade to a hybrid medical-adult use license, a process separate from the lottery.

Governor Lamont at a press conference on January 9, discussing the social equity focus

As of the end of February 2023, there appear to be only twelve current (approved to do business) retail licenses, with eleven of those twelve belonging to medical-adult use hybrids. The majority of the 39 retail licenses listed on the state website are still in the provisional phase, which allows them to “work toward securing a final license.”

Connecticut Social Equity

Connecticut has committed to a robust social equity program and provided an early application opportunity for social equity applicants ahead of non-social equity applicants. In addition, the Nutmeg State has reduced fees for adult-use licenses by 50% for Equity Joint Venture applications, which is where investors agree to partner with a social equity applicant. Further, the state has eliminated 43,754 low-level cannabis convictions.

Connecticut’s social equity requirements are less rigorous than those of neighboring New York and New Jersey, which may provide additional entry opportunities for both in-state and out-of-state entrepreneurs. Connecticut defines a social equity applicant as requiring that at least 65% of a business be owned by an individual with less than 300% of the state median household income in the past three tax years. Since the median household income was $79,855, that individual would need to have earned less than $239,565 annually.

Subversion of the Lottery Process

The lottery for the six initial social equity licenses was held in May 2022 followed by the lottery for the initial six general licenses, which took place in September 2022. Both were administered by a professor and department head at the UConn School of Pharmacy (the state law stipulated the lottery operator must be part “of the state system of higher education”).

15,605 applications were received for both lotteries. Unfortunately, many of the winning applicants flooded the lottery system with hundreds of applications, spending hundreds of thousands of dollars to do so. One example, SLAP ASH LLC, accounted for 850 of the 8,360 applications submitted to the social equity lottery, winning 2 provisional retail licenses. Another company, Jananii LLC, spent over $200,000 to submit 807 entries, receiving one provisional retail license. “There were individuals applying for licenses who submitted 50 applications or more to enter the lottery,” said House Majority Leader Jason Rojas, D-East Hartford. “That wasn’t our intent.” Rojas and others are looking at other options for the next lottery to try and combat the problem.

Protecting Medical Cannabis Patients

Perhaps what makes Connecticut’s adult use cannabis program most unique is its outsized commitment to protecting medical patients’ continued access to cannabis. Concerned that adult use sales wouldn’t leave enough supply for patients, the state mandated a cap of ¼ ounce of cannabis for all adult use purchases. Lieutenant Governor Susan Bysiewicz commented that this action emphasized the importance of “not losing sight of a very robust medical program.”

Lt. Gov. Bysiewicz speaks to an audience on the day adult sales became legal, outside of the ZenLeaf Meriden dispensary.

With the recent strong sales of adult use cannabis, however, patients have expressed concern about access, and now the Nutmeg State is considering further action. A bill is being considered in the state legislature which would create a state cannabis ombudsman. This individual would act as a liaison between patients and the state and would, in effect, be there to put pressure on the four licensed growers. These cultivators are required to submit a medical cannabis preservation plan to “ensure against supply shortages of medical marijuana products” and are in many ways responsible for continued patient access to cannabis.

Licensing Fees

Connecticut lottery winners’ license fees will vary from $1,000 for a micro, to $25,000 for a retail, to $75,000 for a cultivator, subject to a 50% reduction if the applicant is deemed social equity. However, once the field is open to regular applicants, the fees will become sizeable.

Retail license fees will be $1 million and cultivation license fees will be $3 million, and even with a 50% reduction for an Equity Joint Venture application, the investment will be significant. The $1 million fee also applies to any existing medical dispensary that wishes to convert to a hybrid license without going through the lottery process. The four existing cultivation companies that wish to service the adult use market and avoid a lottery process will have to pay the $3 million as well.

Tax Issues

Connecticut cannabis-businesses are obligated to pay a sales tax of 6.35%, a gross receipts tax of 3% and a privilege tax of $0.00625-$0.0275 per mg of THC, depending on the item. Other than New York, Connecticut is the only state to have a tax based on the potency of the cannabis product.

Federal Tax Subject to Section 280E

On the federal level, cannabis businesses are subject to Internal Revenue Code Section 280E, which disallows deductions and credits for expenditures connected with trafficking in controlled substances under the Controlled Substances Act, schedule 1 or 2. As cannabis is a schedule 1 drug, cannabis companies are only permitted to reduce their sales by cost of goods sold when determining their taxable income. By example, a cannabis dispensary would only be allowed to deduct the cost of the product purchased and the cost to transport the product to the dispensary, while disallowing such significant expenses as rent and payroll. All cannabis businesses must forgo expense deductions related to selling, general and administrative expenses, as they are disallowed under the tax code.

While some states like California have not conformed to 280E and allow their cannabis businesses the same deductions as other businesses, Connecticut is not one of those states. Personal income tax starts with Federal Adjusted Gross Income while corporate income tax starts with Federal taxable income as reported on line 28. There are no provisions that say Section 280E does not apply. This will mean a significantly heavier state tax burden for cannabis businesses.

Labor and Employment Issues

Connecticut state flag

Cannabis is expected to fuel significant employment growth in Connecticut, and experts project more than 11,000 cannabis jobs will be added once the market reaches full capacity. These jobs are expected to include full time and temporary positions in all cannabis verticals: cultivation, manufacturing, distribution, retail, marketing, testing, finance, accounting, legal, compliance and C-suite.

As part of its social equity program, the state has made it clear it would like to see cannabis businesses employ individuals from those communities that have been disadvantaged by the war on cannabis. Connecticut has also made it a requirement that every approved licensee enter into a “labor peace agreement” with a labor union, and that such an agreement shall be an “ongoing material condition of licensure.”

The state is focused on maintaining quality control on all aspects of its adult use cannabis businesses, including the people involved. Licenses are needed for all cannabis employees along with a special license for key employees in managerial positions. Additionally, financiers must be licensed, with a Backer license required for individuals with direct or indirect financial interests in a cannabis establishment totaling 5% or more.

Connecticut cannabis employees must be pre-trained through the state’s Social Equity Council. The state also requires that each license recipient have a workforce development plan approved by the Council “to reinvest or provide employment and training opportunities for individuals in disproportionately impacted areas.”

In Summary

No adult cannabis state has come close to having a smooth opening for it adult use sales program, and Connecticut is no exception. With well-funded groups gaming the license lotteries and medical patients concerned about their continued access to cannabis, the Nutmeg State has its work cut out for it. But with its strong commitment to social equity and its outsized commitment to protecting its medical cannabis patients, Connecticut can serve as a role model for compassionate cannabis capitalism. 2023 will reveal how the state rises to its challenges and matures its cannabis marketplace.

Sundie Seefried, President & CEO of Safe Harbor Financial

A Q&A with Sundie Seefried, President & CEO of Safe Harbor Financial

By Cannabis Industry Journal Staff
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Sundie Seefried, President & CEO of Safe Harbor Financial

As the former CEO of Partner Colorado Credit Union (PCCU), Sundie Seefried has been in the credit union space for 39 years. Established in 2015, Safe Harbor Financial is now a leading provider for banking and financial services in the cannabis industry.

Seefried founded Safe Harbor as a cannabis banking program for PCCU, and since then it has withstood scrutiny of 16 separate federal and state exams. Entering its ninth year as a cannabis banking program, they have almost 600 accounts in 20 states and have processed over $14 billion in transactions for the cannabis market. In September, Safe Harbor began trading on Nasdaq under the symbol SHFS. The company has also announced a definitive agreement to acquire Abaca, an industry-leading cannabis financial technology platform.

Seefried has seen it all in the cannabis banking world. We wanted to get her thoughts on some current events, the future of cannabis banking and lending, and what the next few years might hold in store for an industry ready to grow.

Cannabis Industry Journal: Tell us a bit about yourself. What is your background and how did you find yourself in the cannabis industry? How did you get to become president and CEO of SHF?

Sundie Seefried, President & CEO of Safe Harbor Financial

Sundie Seefried: I’ve been in banking in the credit union space since 1983. I became CEO of Partner Colorado Credit Union in 2001 and stayed there for 21 years. Everything I do, I have a very conservative nature just from being in the banking world and doing things methodically and building good foundations that endure long term. In 2014 when FinCen issued guidance, I was supposed to retire, and I had dinner with some old friends that were attorneys who couldn’t get bank accounts for their clients in the cannabis industry. They asked me to help and I looked into it for them. I assumed the regulator would shut me down but he didn’t; he actually encouraged me to move forward and look further into things. As I educated the board, we saw just how unsafe Colorado was and the serious need for the community to figure things out with respect to banking and cannabis. Coming from that credit union perspective, I said I think we can do this, let’s try and I’ll go through the third parties necessary. And that’s how we got into this, just looking to try and help solve Colorado’s problems and get banking access for cannabis companies. 

CIJ: Tell me about your company’s mission. What is your financing strategy in cannabis and of the companies you do business with, what do you look for most?

Seefried: Our mission remains the same, and that is to normalize banking in the cannabis industry as much as possible. Because the black market still exists, the issue becomes sorting the legal entities out from the illicit actors in the industry. We know that the illicit market is trying to hide amongst the legal environment, which really makes things difficult for upstanding cannabis businesses. We can normalize banking by making sure we help legitimize the compliant entities and sort out the bad actors. We really only want to work with legitimate players with licenses, who are fulfilling expectations on the regulatory level and have no problems with compliance. We have been able to do that on the depository side.

We have always been a low-cost provider and our clients count on that. As we move into the lending part of the industry, we’re looking to do the same thing. There are lenders who charge one-to-three percent per month, 18 to 36 percent per year. We, on the other hand, are targeting more of an eight to thirteen percent annual rate. More of a conservative approach. Real debt underwriting. No extremely high interest rates. We look for the collateral, we look for well-organized businesses and solid documentation. Those are the businesses we are trying to bring into the fold and offer them normal loans. Cannabis will always have a premium on it simply because it is illegal at the federal level and there are additional hoops we have to jump through. Because of the potential forfeiture and seizure, if there are bad actors, etc., it really behooves any clients coming to us to also place their depositary services with us so we can prove their legitimacy and provide loans to them.

CIJ: Let’s talk about the Canopy Growth news. They announced they are pulling the trigger on acquiring Wana Brands, Acreage Holdings and Jetty Extracts, under the Canopy USA holding company and ahead of federal legalization. On the surface, it looks like they are bypassing a lot of the hurdles American cannabis companies currently face with financial red tape. As a foreign company trading on the NASDAQ dealing with a schedule 1 substance, do you expect Canopy to have a significant, some would say unfair, competitive advantage with their early entry? Or is this perhaps more of a rising tide lifting all boats scenario? What effect will this have on the current market landscape?

Seefried: I find it a very interesting move on their part. Certainly, they have a big advantage in comparison to other companies. The consolidation in the industry is moving so quickly. Other players will keep up with this just as fast as Canopy is moving in. That’s my opinion in terms of what I see in the consolidation area of the market. I think what it really hurts is small businesses. My heart goes out to them. So many of them worked so many years to build excellent small companies with boutique shops, and this whole move will really change that part of the industry.

I see a lot of these small players, non-vertically integrated companies, being impacted in a negative way due to such mass consolidation and the entry of foreign businesses. We need to get more competitive on a global level in order for our companies to grow and thrive. This happened back in 2018, when so many companies started doing those reverse takeovers onto the Canadian Securities Exchange and suddenly, they were putting tens of millions of dollars into the U.S. market. People didn’t see that as a competitive disadvantage for American companies, but now this move by Canopy may really show that we have to look at things more globally.

CIJ: Biden’s announcement regarding the scheduling review for cannabis has a lot of industry folks very hopeful that federal legalization is closer to a reality than before. Do you share their optimism?

Seefried: Closer than before, yes. But how close? I am not convinced it will happen quickly. If they are really going to consider rescheduling or descheduling, everything happens in Washington very incrementally. Eight years and seven attempts at the SAFE Banking legislation and still no movement on that front. Tomorrow, we’re going straight to legalization? I have a hard time swallowing that one. I just don’t see that big of a jump all at once. I think it is interesting coming just before the midterms and votes are really needed now more than ever.

What Biden did was a great start. Especially for those people in prison for possession. The interesting part of it is, we are very serious about people who have used it, but the people who have sold it and are in prison might be in the same situation. Given how the laws worked for so long, just based on the amount of cannabis you had could get you automatically labeled as a dealer, which isn’t the case for a lot of incarcerated folks.

The fact is, the social equity and justice issue, who do you free or who do you not free from prison, is a very difficult issue to get through. I think it is a great step forward and it will help some people who were treated unjustly, but there is still a lot of work to be done.

“I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.”As far as rescheduling, if they go from a Schedule I drug to a Schedule II drug, that will do no good, but it certainly is a bone to throw to the industry if you want to look like you are making some progress. Schedule II is still subject to 280E tax code so it will only do so much. If they want to make things more equitable and actually level the playing field, they have to do something about the 280E issue hindering every cannabis business in the country.

As far as full legalization, I am not optimistic because of all the players that need to be involved. Full legalization will require a change to the IRS tax code 280E as well as other tax issues. I think there are too many players: The DOJ, FinCen, the DEA, the FDA, the IRS. All of these agencies will have to agree on full legalization and moving forward in unison. The DEA is trying to fight illicit actors and illicit drugs. FinCen is trying to follow the money to find illicit actors. As long as there is an illicit market it will make their job tough, and on top of all of that, we have politics in play. That is just my take on legalization. It is going to be a much more complex problem than just legalizing the plant and moving on. Rescheduling seems like lower hanging fruit, but they will have to move it higher than a Schedule II.

CIJ: With the midterm elections here, there are a number of legalization measures in a handful of states, along with political control of Congress on the ballot. How do you think a Republican or Democrat controlled Congress will affect cannabis legalization progress?

Seefried: I just finished doing some lobbying in September in DC and spoke to some Senator offices in person, and I heard a lot of interesting topics being discussed. One of the things that keeps popping up is that social equity and justice is a huge issue. If we can’t solve this injustice in our system that has been going on for decades and decades, maybe they’ll hold banking legislation hostage. You can’t correct 50-60 years with one piece of legislation. Everything has to be incremental, unfortunately, so there will be some give and take there. I think that was a primary focus, especially with the Democrats and I do think it is a worthy cause.

On the Republican side, economically improving our competitive advantage as a country. They are starting to see the jobs being created and the tax revenue coming in and the growth of the industry. They will have to make that decision at some point in time whether they are going to leave the American cannabis industry behind or allow them to compete on a global level. I really think everything will move slowly and continue as it has happened in the past.

I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.

CIJ: As we inch closer to 2023, what do you expect the next year to offer for the cannabis financing market?

Seefried: I would say, with or without legislation, they’re finding greater access to banking. And the reason they are getting better access to banking is because none of us have been prosecuted for simply engaging in cannabis banking. I think we have set a precedent over the past eight years, not only us but other service providers in the industry and that we are not being prosecuted.

I see more financial institutions entering the market slowly. The second reason access to capital and banking will increase is because every financial institution in the country wants that lending relationship. In order to get there, they want to start with the depository relationship, and they don’t want smaller players presently doing it and getting all of those relationships before they enter the market. I think the competitive nature of the financial industry to land that lending relationship is going to force them into the game sooner than later.

Can Employee Resource Groups Really Help Streamline My Business? Yes. Here’s How…

By Anya Varga
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In 1996, the Harvard Business Review published an article called Making Differences Matter: A New Paradigm for Managing Diversity, in which the authors argued that companies should adopt a radically new way of understanding a diverse workforce. Instead of hiring employees of different backgrounds and asking them to blend in, or limiting people to areas of work based on their identity, they suggested embracing and bringing together the varied perspectives and approaches to work that members of different identity groups bring. Since then, a steady stream of companies – from GE to PricewaterhouseCoopers to cannabis companies – have implemented several new practices, initiatives and programs under the category of Diversity, Equity and Inclusion (DE&I).

DE&I has become highly important over the last few years, and many companies are seeing the benefits. Today, 83% of professional investors are more inclined to invest in stock of a company well-known for its social responsibility. On the other hand, a company that is seen as not responsible stands to lose as much as 39% of its potential customer base, with one in four consumers telling their friends and family to avoid it. As these benefits draw more companies to focus on DE&I, it’s important to remember that your plans should ultimately be centered around uplifting employees from all backgrounds.

“Listen, test, learn and then listen again!”While still relatively new to the cannabis sector, one DE&I initiative that is making some headway towards that goal is the Employee Resource Group (ERG). Essentially, it’s a group of employees who join together in their workplace based on shared characteristics or life experiences. ERGs work to create communities which bring people together, with internal and external partnerships to support those groups, and they are gaining popularity. In fact, according to a Bentley University report, almost 90% of Fortune 500 companies utilize them. They’re often used because issues are addressed from within an organization by the people who are most directly impacted by them. They can also serve as a direct pipeline of communication between employees and employers, as well as a place for new ideas and solutions to problems to blossom.

When it comes to recruiting and retention, ERGs have their own specific benefits. According to a survey conducted by Software Advice, 70% of respondents between 18 to 24 years old and 52% of respondents between 25 and 34 reported they would be more likely to apply for a role at a company that had ERGs. With regards to retention, 50% of survey respondents across all ages stated they would remain at a company because it had an ERG.

While some in the cannabis sector have already implemented ERGs, this new practice is one that all cannabis companies should consider – particularly as this industry grapples with its own unique DE&I challenges and history.  To that end, check out the tips below to help get you started.

  1. Gauge interest: Many ERGs start organically. The first question you need to answer before you can start building an ERG is to ask if your employees want one. The statistics indicate they likely will, but it’s important to establish that leadership is willing to listen. Employees should play a major role in this process from the beginning. However, remember that the DE&I strategy is not their responsibility, and ERGs should be a part of a more comprehensive plan.
  2. Find the willing and work with them: You’ve got to find the people that these topics matter to and embrace them. Participation is key, and if the topic at hand is one that someone is not personally connected to, your ERG may not live up to its full potential. ERGs are a significant time investment, so you have to make sure those taking part are ready, willing and capable of balancing their job responsibilities with their additional role in the group. Participation goes both ways, too. You have to make sure that managers are aware that someone is in an ERG. “Be open to making mistakes and learning from them, and then changing for the better.”
  3. Use executive sponsors: An essential piece of successfully incorporating ERGs into your organization is recruiting executive allies from the corporate side to serve as sponsors. This can help break through barriers, get decisions made, and keep all parties organized. Executive sponsors are also great for employee development, as they can see firsthand the talent in the organization and become a mentor. Executive sponsors are often an important request from ERGs, and they are worthwhile to recruit for. Sponsors don’t have to be from the same affinity as the group, and in some ways, that can actually be a good thing. Solidarity is another important factor to company health, and allyship is imperative for solidarity.
  4. Set goals: Define a mission early on. It’s important for ERGs to have a strong mission statement with core goals that the group is formed around achieving. Keep in mind, these need to be tangible goals with specific benchmarks. It can’t just be “increase diversity in hiring.” Set a number you’d like to reach and a date you’d like to reach it by. Having clear objectives keeps a track record for your ERG, and is the foundation for success. These will also ensure that your ERG is not just for marketing purposes. Achieving substantive goals will keep the group going, as confidence gets built on the inside and from the outside.
  5. Be clear: ERGs are all about communication, so clarity has to be a top priority. None of the above tips work without that. You have to make sure the groups are not questioning what is expected of them, what resources they have to work with and what goals they are working towards. It’s always going to be a learning process, and there will certainly be unforeseen challenges, but being on the same page from chapter one will make the process that much more beneficial to all involved.

As stated above, ERGs are still new, just like the industry we want to bring them into. Be open to making mistakes and learning from them, and then changing for the better. That process is what ERGs are about at their core, after all. Listen, test, learn and then listen again!

budtenderpic

The Coming Cannabis Data Squeeze – And Why So Many Companies are Flying Blind

By Michael Blanche
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budtenderpic

“Data” is a hard concept to picture. It’s even harder to visualize what your data is saying about your business. Many important insights are processed on different systems, never to see the light of day.

In the digital advertising industry, we call this “data silos.” In the cannabis industry, we call this the cost of doing business.

Without traditional tech tools or a source of truth on market sentiment and trends, there’s no common picture that can show us the day-to-day behavior of today’s cannabis consumer. Companies are often guessing what consumers want based only on the data they have available.

To keep growing, dispensaries and brands have to modernize how they understand, activate and measure customer data. Luckily, it may be easier than you think to start making better use of your customer data right away, which means it’s easy to simplify how you connect to both existing and new consumers, driving more engagement and revenue.

Cannabis companies that started digital-first have a head start on legacy businesses: phone numbers, emails, customer preferences are all first-party data that can help you find and advertise to new customers.

Here’s how:

1. Build Your Customer Database with a Rewards Program.

A 2022 YouGov survey found that when cannabis consumers are asked about how they make purchasing decisions:

  • 36% said quality and safety
  • 34% said lowest price
  • 32% said location (proximity to home)
  • 31% said preferred products

Most cannabis businesses know the power of rewards programs, but usually depend on steep discounts to get customers back in the door. Rewards programs can also offer promotions for new product releases, exclusive access, community events and other things that offer information about things you know your customers already care about.

The most valuable thing about a rewards program isn’t just the sales – it’s the data. If a customer makes a profile with an email and a phone number, you have the basic building blocks for a first-party data strategy. Just make sure you have a way to keep that data organized on the back-end.

Want the real secret? Segment your email and SMS list by what you know your customers want. Send different communications for different customer groups and behaviors – like edible users and pre-roll buyers or monthly buyers and weekly buyers. Figure out what resonates and repeat!

2. Budtenders that Care. 

A relationship with a budtender is sometimes transactional. Other times, it’s confessional, fun, or, if a consumer is new to buying cannabis or trying different products, educational.

As one survey found: 22% of customers always decide what to buy based on budtender advice and 69% said they seriously consider their opinions.

Good budtenders get to know the customers and can become advocates for staying in touch. Training them to sign up customers for a rewards program or exclusive offers can help build the relationship that keeps people coming back and allows you to stay in touch. This is how you can link your data efforts with your frontline employees.

3. Find a Secure Way to Manage Your Customer Data. 

To segment customer data and build customer profiles with additional information – like purchase history or demographics – you need to find a solution built for a growing customer database. Some options, like an email marketing platform, can get you halfway there. But a lot of companies still rely on Google Sheets, which can take hours to understand and end up exposing a lot of customer data out in the open.

The right customer data platform should help you connect and integrate all your different data sources, from website and ecommerce platform to point-of-sale. This allows you to understand macro and micro market trends by making your customer segments transparent and easy to manage as they move down the path to purchase. You can also identify which segments drive the most value over time and what attributes and behaviors they have in common.

By managing customer data from one platform, you can dramatically increase the transparency across all the valuable insights that affect your business. And then make use of those in your next big advertising campaign.

Combining Co-Marketing with Community

You can avoid the cannabis data squeeze by modernizing how you handle customer data. Dispensaries with advanced data management practices are often processing thousands of transactions a day and constantly enriching their understanding of customers and their target markets. Unlike dispensaries, brands don’t have the same volume of new data. This has a lot of implications when you’re trying to reach new customers, because when a brand launches a digital advertising campaign, a lot of budget can get wasted if the audiences are based on a limited dataset.

That’s where co-marketing digital advertising campaigns can help. Cannabis companies collaborate to activate events and retail displays. To really build awareness and drive sales, cannabis brands should reach a dispensary’s existing customers and advertise in coordination with the dispensary. With the right dataset, you can show ads just to a dispensary’s best customers, and the ones most likely to buy your product.

The most exciting part about the future of the cannabis industry all comes down to data. The community grew together, and now businesses can innovate together – building a better customer experience by understanding every stage in the journey. In a relationship-first industry, cannabis digital advertising has to be as personalized as a budtender’s recommendations.

Chris Lacy

The Story of Chris Lacy: Social Equity & Hope in Cannabis

By Cannabis Industry Journal Staff
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Chris Lacy

Christopher Lacy and The TGC Group recently won a Tier 3 conditional license under New Jersey’s social equity licensing program. Their story is one of misfortune, persistence, family and the dreadful effects that cannabis prohibition and the War on Drugs has had on impoverished BIPOC communities.

Chris’s father was a sharecropper in Mississippi before he moved to Illinois and started a family. Growing up in a poor neighborhood of Chicago, Chris was surrounded by gangs and crime. He started selling drugs when he was 12 and went to prison for cannabis before he was old enough to drink. When he got out, he saw firsthand the effects that incarceration has on a person, their family and their community.

Back in 2020, Chris Lacy and his wife Taneeshia Thomas applied for a craft grow license under Illinois’s new social equity program. Taneeshia wrote an article for Cannabis Industry Journal highlighting their story.

When it was first announced, Illinois’s social equity program seemed revolutionary and one that other states soon followed, setting the stage for markets all over the country to establish social equity licensing programs. However, legal hurdles, red tape and intense litigation have bogged down the system, causing severe delays. Chris and Taneeshia are still waiting to hear back about approval of their license application, years later.

Good news came recently when they were notified that they were awarded a conditional license in New Jersey. With the help of his family, business partners and The Garden State, The TGC Group is moving forward with launching their business. We caught up with Chris, to check in on his business’s progress, hear his story and see if it might inspire others to take a similar path.

Cannabis Industry Journal: Tell me a little bit about yourself and your story with cannabis

Christopher Lacy, Founder of The TGC Group

Christopher Lacy: I grew up on a dead-end block in a little town in Illinois on the far south side of Chicago called Robbins. It has a very high crime rate and a very impoverished community so as you could imagine we grew up pretty poor. I personally didn’t feel the effects of poverty until just before I turned 13. I guess that became more obvious as I started hanging out and seeing that most of my friends had more than 2 pairs of pants. I starting selling drugs when I was 12 years old.  When I was about 16-17 years old, I had started trying to grow cannabis. Like any task, it takes time to develop the skills produce a good product. Cannabis definitely has it challenges when it comes to cultivating a product that could be considered good.

It’s not like there was an abundance of information out there specific to cannabis cultivation to aid in the task so besides the basic book knowledge of horticulture, you had to grind it out. It took me a couple years to really get it figured out. Once I did get it going, I started expanding. At first it was basements in the suburbs. We’d grab really nice houses and fill the basements with plants. When that wasn’t enough, we started doing warehouses. There was no real limit, outside of capital and the desire to not draw attention via odor or traffic from workers, if you could produce it, the demand was there. I did go to prison for a short stint when I was 20 years old for delivery of a controlled substance. 0.8 grams. After I got out of prison, I had a very successful illegal operation growing and selling cannabis. Life was pretty good for a few years. I wasn’t rich or anything like that but I was able to be around my family and provide the things that I was denied when I grew up. I don’t blame my parents for what I went through growing up. Because of my father’s age, I’m generation 1 out of the sharecropping era. My parents believed in one thing and that was learning. I tried to instill that into my kids as well. Being a father feels really good to me. Unfortunately, that dream was ended when I was arrested in one of our warehouses in Illinois. I did 3.5 years, locked down 21 hours a day for growing weed.

While serving my time I was able to really take a look at myself and develop a new me. I established some new core principles that I would hold close to my heart. One of them being not going back to jail for the sake of a dollar. I was not going back to prison. I had kids when I was young so I missed out on a big part of their childhoods. I had three daughters and two sons at the time that were of an age where having a stable home plays a huge role on how the child will turn out in the future compared to a typical American lifestyle.  When I got out of jail, my kids came and lived with me during and after high school but some serious damage had already been inflicted.  I worked a job as a truck driver and did the best that I could to support my family, but I never really gave up on cannabis in the back of my mind. My older brother used to always tell me that I didn’t learn what I knew about weed for nothing and that one day it would all make sense.

Christopher with his wife, Taneeshia

For the next few years, we just grinded it out as a family. It wasn’t the ideal situation but we made it work. And when we couldn’t make it work, we lived with it! I just was glad to be there doing Chemistry homework with the kids. That shows what happens when a father is at home with his family. We get college grads.

When the message came out that Illinois was going to do craft grow licenses, I got really excited. I figured this was my chance to do what I love and to make a living doing it. I had no idea how I was going to get to where I wanted to be but I figured if I could just put one foot in front of the other, sooner or later I would get there. I caught a break when my nephew, Edward Lacy, introduced me to someone who understood the application process. She introduced me to some of the most wonderful/helpful people in the world. People who literally wanted to help true social equity applicants like myself. With the help of these new friends, we were able to drop our first application in Illinois. After we submitted that application, that is when the first story came out about us in Cannabis Industry Journal. This story helped me get into a conversation with Cresco labs and I was able to get into a situation that really changed how I saw cannabis production. I got to work around some of the smartest people in the industry for just under a year. I can’t thank Charlie, Barrington and the rest of the guys at Cresco enough for the opportunity. From there, I knew it had to be my destiny to grow cannabis for a living. I just kept beating up the phones and emails. Something was gone give.

CIJ: When we last spoke, you were trying to get a social equity license in Illinois, can you tell me about that? How did it go?

Chris: Ultimately, after 2 years of waiting, we were denied a license in Illinois. When I first got this news. it took me about a week to get out the bed. Lol. It took my wife to pull me through. I can only imagine the pain that all the other disappointed groups are feeling, Ultimately, we all couldn’t win in Illinois so it is what it is. But definitely a big shout out to all the successful applicants that did win. You all have a torch to carry that should ignite the black and brown communities.

From the political standpoint in Illinois, it’s just not conducive for social equity applicants to succeed due to all of the legal hurdles, courts, lawsuits, etc. Not to say that the Illinois process is truly different from other states going through similar processes, New Jersey and other states went through a similar process when social equity licenses were announced. The laws that helped me qualify are what came out of the legal battles in New Jersey. The issue is the resources available for legal fees, holding property, and the time required to see these things through; this all equals dollars and that’s just something lacking in most social equity groups.

CIJ: So, what made you look at New Jersey?

Chris: After I had submitted my application in Illinois, I began looking for financial support. I knew this would be my limiting factor because access to the type of capital required to get a grow facility off the ground is quite substantial. For the most part no one returned calls but I called one financial institution in particular, VenCanna Ventures, and for some miraculous reason, they returned my call. I’m not sure what made them; but we kept an open line of communication going all while we were dealing with Illinois. I knew these guys were good because they were behind an impressive project in Ohio that actually won LEED certification. When I look back on it, it felt like a one-year interview. Then one day this past winter David McGorman, the CEO, asked me to partner up with him in New Jersey. It was exactly what we both needed. He has the expertise in finance and I bring the operations side.

Christopher with his daughter, Janeace Lacy

Once we had that team together, we put together a strategy to try and apply in New Jersey. We built the application and New Jersey actually had some very unique laws. If you had a cannabis conviction, you could qualify. Also, my oldest daughter, Janeace, whom I think my prison time hurt the most, actually lives in New Jersey with my granddaughter. So, she’s our resident in the state that helped us win the application and now a part owner, which led us to where we are now. I just couldn’t be more excited about all of this. It just feels right

We won a tier 3 conditional license and now we’re working on finding a good facility and building the operation.

CIJ: How did you set up your social equity license application for NJ?

Chris: It was a process very similar to Illinois except that the process was split into two phases. A conditional license and an annual license. Phase one was winning the conditional license. This is a more condensed application compared to what I was used to. After filling out the application, we had to submit a bunch of documents and proof of incarceration. That was for the conditional license. We still have to convert the conditional to the annual. The conditional basically tells us that we qualify and we can move forward with the rest of the business plan, find some property and spend some money on a lease. We’re still in that process for converting to annual, but we have won the conditional.

CIJ: What is your plan now that you’ve received conditional approval?

Chris: Right now, we’re working on property and securing a space for our facility. We are pretty close to nailing down a couple good locations. One of the locations that I am really excited about is in Somerset County. If we can lock down the property, submit everything to the state as far as our SOPs, security plans, cultivation plan, design, etc. we can try get approval to convert to the annual license and then we can start the build out. The good thing about the two-step process is that it really helps when it comes to spending money. Basically, if you don’t win a conditional, don’t go out spending tons of cash trying to hold onto property.

CIJ: You’ve come a long way from being put in prison for cannabis, to now being close to establishing a business in New Jersey. What made you decide to stick with the business of cannabis?  

Chris: You know, I can’t really describe it very well. It was just one of those feelings, you know it felt good to me. It drew me in when I was a young kid, although, I actually didn’t try using cannabis until I was 21. That’s when I first used it and it really jelled with me. Also, I’ve always loved gardening.

Chris Lacy

My father was a sharecropper in Mississippi, when our family moved to the suburbs of Chicago the first thing he did was plant a huge garden. I grew up in the garden and around plants. He used to spend so much time in that garden and I loved being there with him. We grew everything out there year after year until he was too old to keep it up. I can’t imagine a more peaceful environment then out in the fields with the plants.

It was also therapeutic, not just the obvious therapeutic aspects of cannabis, but also how therapeutic gardening is. Working with cannabis plants can be a challenge. To try to achieve unique terpene and cannabinoid profiles has always been a lot of fun for me. I love the challenge. Pushing genetics as far as I can to really experience what different cultivars have to offer. It is just one of those things that has always stuck with me and I really enjoy it. Once it became legal, a world of opportunity opened up for me.

You know, people say if you do something you love, you’ll never have to work a day in your life. I was a truck driver after I got out of prison, and I really didn’t like it. I had to have neck surgery from the pounding my spine took. I had to work long hours, man I hated doing it. On the flip side, cannabis is something I love to do. And this is about me trying to control my own destiny, control my own life. I don’t have to struggle mentally and physically just to provide for my family. That’s what keeps me going – the drive to do what I love to do to provide for my family. I see cannabis cultivation as more of an art than I do anything else. The guy behind the growing at any facility in the country could share with people what he believes to be fire. I just love to provide an experience and there’s nothing more satisfying than a satisfied customer. Everything about this process seems to fit perfectly with my life.

CIJ: It’s a pretty inspiring story. How do you hope your story might inspire others to follow in your footsteps?

Chris: I don’t want someone to follow in my steps as far as breaking the law and going to prison. I had to learn this the hard way, you know I didn’t agree with the law, but it doesn’t matter. Whether you agree or disagree with the law, I don’t advise anyone to be a criminal.

On the other hand, I do believe that black and brown people have been impacted by the war on drugs the most. In whatever capacity they can, they should chase the opportunity in this country as the cannabis market evolves. It’s a new industry, it’s a way for people to build wealth, to maybe raise their families out of poverty. So in that sense, yes, I do hope people see my story and see that they could do this too. And if you still out there getting it the best way you know how, God Bless you! Lord knows it breaks my heart every time I see someone get arrested for cannabis. Hopefully that shit stops soon and we can get these mothers and fathers who are basically prisoners of a bogus war, reunited with their families and hopefully they get a chance to rebuild.

This a chance to build generational wealth if it’s done right. I would hope that anyone looking for an opportunity, look into the cannabis space. I know its evolving fast and the window might seem like its closing but that isn’t the case. This is more like the 2nd inning of a baseball game. There plenty of time to get going.

 I don’t think I’m the best role model. I just keeping fighting. And my advice for black and brown folks that might have gone to prison or might be put in a similar situation is this: Its never over. It’s never too late, no matter what somebody does. It’s not the end of the road. It’s just a bump at that moment. Just keep fighting. One step at a time. I do hope that people reach out to me.

I would love to work with anyone as long as they on a positive path, especially convicted felons. God Bless the felons! That’s my number one priority on my list. The guys that have been to prison, the non-violent drug offenders. Our society has a way of shunning those people. Some of the smartest people I’ve met in my life were in prison. It doesn’t speak to the character of an individual because they went to jail. If the system is supposed to work then why is it so hard for a convicted felon to get another chance? Of course, a few people have traversed this path successfully but there are so many more.

CIJ: I know your business is called The TGC Group. Out of curiosity, what does that acronym stand for?

Chris: We’re called TGC New Jersey under our license there and we applied in Illinois under the name, The TGC Group. TGC stands for a lot of things. It has a lot of meanings. I came up with it when I was in prison. I called it The Gathering Company. It was an idea I had because I was reading The Wall Street Journal every day in prison. I wanted to gather people under one umbrella.

But also, my name is Chris, my wife’s name is Taneeshia, (whom I am forever grateful for helping me pull my life together) and we have a son we named Grant. So, the first letter of each of our names also make TGC. It also stands for The Good Choice, because it is a good choice. The Ganja Connoisseur is another good one. I just hope that it grows to be known as a quality brand of cannabis that one can count on for consistent high-quality cannabis. Consistency and quality are what we’re striving for relentlessly.

I hope people read this article and feel inspired. We have a responsibility to give back to the community. We have a responsibility to rebuild what’s been destroyed in our communities. I am just trying to do my part. I was not a nice guy growing up, you know I was a gangbanger. But now, I want to rebuild and give back to my community the best way I can in Chicago. Not just my community, I want to give back to New Jersey communities, because we’re in their house now. I want to give back to Mississippi communities, where my family comes from. I’m not in this to get rich, I am in this to build communities. God willing, we will

2022 Infused Products Virtual Conference: June Program

By Cannabis Industry Journal Staff
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2022 Infused Products Virtual Conference: June Program

Sponsored by Millipore Sigma, Berlin Packaging and Cannabis Safety & Quality (CSQ)

Click here to watch the recording

Agenda

Elevating Edibles: Defining the Next Cannabis Experience
Sam Rose, Director of Operations, Herve

Attendees will learn during this session:

  • Luxury edibles and form factor: Moving away from get high first and think about what you’re consuming second, a pivot from sugar filled, bad tasting edibles to delicious and refined ingredients. Non-juvenile form factors, healthier options, efficacy
  • Concentrates and infusion: Providing the consumer with the right high using the right ratios and concentrates. Bioavailability, highlighting the plant, absorption method (sublingual)
  • Giving the consumer what they NEED not what they WANT: We’re at a fragile point in time where people are either trying cannabis for the first time or experimenting with it again for the first time in a long time. We need to make sure these people have a good experience and not scare them away. High MG edibles and high % Flower is not the way to do this – the how high for cheap model is really toxic for the industry. We need to educate, we need to provide clean low dose edibles and more curated flower.

TechTalk: Millipore Sigma

Dr. Sunil P. Badal, Senior Scientist, Innovations/Advanced Analytical R&D, MilliporeSigma

Cannabis Beverages: The Rise of a New Market & a New Consumer
Christiane Campbell, Partner, Duane Morris, LLP

Attendees will learn during this session:

  • The current landscape and regulatory red tape surrounding cannabis beverage brands
  • Selecting and adopting a cannabis beverage brand
  • Protecting a cannabis beverage brand

TechTalk: Berlin Packaging

Julie Saltzman, Director of Cannabis Business Development, Berlin Packaging

One Symbol to Rule Them All! Harmonization is Finally Here!
Darwin Millard, Owner & Founder, TSOC LLC, ASTM Subcommittee Co-Chair

A picture is worth 1000 words, but with a hogbog of “universal” symbols, is something getting lost in translation? ASTM International’s new standard, ASTM D8441/8441M, Specification for an International Symbol for Identifying Consumer Products Containing Intoxicating Cannabinoids, serves to establish a truly harmonized international warning symbol. Learn about the significance and use of this all-important standard from one of the members of ASTM Committee D37 on Cannabis who helped developed it.

TechTalk: Cannabis Safety & Quality (CSQ)

Tyler Williams, Founder & CTO, Cannabis Safety & Quality (CSQ)

Evaluating the Safety of CBD – Data Needs
Dr. Steven Gendel, Principal & Advisor, Gendel Food Safety, LLC

Attendees will learn during this session:

  • Understanding how regulatory agencies think about safety for the ingredients in edibles
  • What we can learn from the EFSA data call
  • What is a realistic time frame for the process

Click here to watch the recording

AOAC Launches Cannabis Proficiency Testing Program

By Cannabis Industry Journal Staff
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In a press release published this week, AOAC International announced it has partnered with Signature Science, LLC as the test material provider for the new AOAC Cannabis/Hemp Proficiency Testing program. What makes this proficiency testing (PT) program so unique is that AOAC will be the only PT provider to offer actual cannabis flower as the matrix.

This month, the pilot round with twenty cannabis testing labs begins with hemp-only samples being shipped in early May. The first live round of the PT program is scheduled for November of this year and will offer participating labs the choice of cannabis flower samples or hemp samples.

The program will include one sample for cannabinoid and terpene profiles, moisture and heavy metals, as well as a second sample for pesticide residue testing. According to the press release, mycotoxins will be added to the mix soon.

The new PT program was developed by stakeholders involved with the AOAC Cannabis Analytical Science Program (CASP), including state regulatory labs, industry labs, state and federal agencies and accreditation bodies. Shane Flynn, senior director of AOAC’s PT program, says the program is a result of scientists coming to them with concerns about testing in the cannabis space. “AOAC has a long history of bringing scientists together to address emerging topics, so when stakeholders came to AOAC with their concerns and need for quality proficiency testing in the cannabis industry, AOAC acted,” says Flynn. “Stakeholders noted the analytical differences in testing cannabis versus hemp and had specific concerns around it and asked for a program that would provide actual cannabis samples in addition to hemp. This is truly a program that was created by the stakeholders, for the stakeholders.”

AOAC says they plan on introducing microbiology to the PT program, with microbial contamination tests in both cannabis and hemp samples. They are also considering adding additional matrices, like chocolate and gummies.

Signature Science is an ISO 17043 accredited proficiency test provider that also has a DEA-licensed controlled substances lab, making them an ideal candidate to partner with AOAC for the PT Program. They entered into a 3-year MoU with AOAC for the program. Their team developed and validated methods used to create the samples for the PT program at their DEA-licensed lab in Austin, Texas.

New York Expands Medical Access, Prepares for Adult Use

By Cannabis Industry Journal Staff
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Now entering its sixth year of medical cannabis legalization, the Empire State is well on its way to expanding the market considerably. When New York first legalized medical cannabis, it had some of the strictest rules in the country. Dispensaries needed to have pharmacists and doctors with special training on staff, they couldn’t sell flower and there was a very small list of qualifying conditions for getting a cannabis prescription.

While New York legalized adult use cannabis back in March of 2021, the actual market is still probably about a year away from launching. The bill immediately decriminalized possession up to certain amounts and set up the Office of Cannabis Management (OCM), New York’s regulatory body now overseeing the medical, adult use and hemp markets.

Over the past six years since the state legalized medical cannabis, the rules have eased incrementally, with more licenses awarded, more doctors participating, more qualifying conditions approved and a larger variety of products on dispensary shelves. Back in 2017, they added chronic pain to the list of qualifying conditions, which was seen as a big effort at the time for expanding patient access.

Just a few weeks ago on January 24, 2022, the Office of Cannabis Management, dropped all qualifying conditions. That means patients with more common ailments and really any type of condition, like anxiety or sleep disorders, can get a prescription for cannabis.

“Launching the new patient certification and registration system and expanding eligibility for the Medical Cannabis Program are significant steps forward for our program,” says Chris Alexander, executive director of the OCM. “We will continue to implement the MRTA and ensure that all New Yorkers who can benefit from medical cannabis have the access they need to do so. It’s important for New Yorkers to know that even as we shift the medical program to the OCM, your access will not be disrupted and the program will continue to expand.”

New York City
Image: Rodrigo Paredes, Flickr

In addition to dropping qualifying conditions, the state took a number of other measures to increase access and allow the market to expand further. For example, dispensaries can now sell flower, more physicians like dentists, podiatrists and midwives can participate, the OCM removed the patient registration fee and they increased the amount of cannabis patients can purchase at a time.

Beyond the medical market, New York is making strides in launching their hemp program as well as preparing for the eventual launch of the adult use market. Back in November, the state’s Cannabis Control Board approved new regulations for the hemp program, establishing standards for manufacturing, lab testing, packaging and labeling.

On the adult use front, delays are the name of the game. According to a publication called The City, delays to launch the new market have been made worse by former Governor Andrew Cuomo’s resignation following sexual harassment allegations. They say the state might not see the launch of the adult use market until early 2023 at best. Decisions on licensing, standards and rules are to be made by the Cannabis Control Board, a five-member commission tasked with overseeing the OCM. So far, the Board has not addressed a timeframe for when they will begin adult use sales.

A Conversation with the Founders of Veda Scientific: Part Two

By Aaron G. Biros
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This is the second piece in a two-part conversation with the founders of Veda Scientific, CEO Leo Welder and CSO Aldwin M. Anterola, PhD. To read part one, click here.

In part one, we chatted about their backgrounds, their approach to cannabis testing, their role in the greater industry and how they came into the cannabis industry.

In part two, we’re going down a few cannabis chemistry rabbit holes and realizing that what we don’t know is a lot more than what we do know. Join us as we delve into the world of volatile compounds, winemaking, the tastes and smells of cannabis, chicken adobo and much more.

Aaron: Alright so you mentioned the GCxGC/MS and your more advanced terpene analysis. How do you envision that instrument and that data helping your customers and/or the industry? 

Leo: Some of the things that we envision will help is a better understanding of what compounds and what ratios will lead to desirable outcomes, things like better effects, aroma and flavor. By better understanding these things it’ll help the industry create better products.

I have a personal connection to this. My wife has some insomnia and she’s always had to take various forms of OTC pharmaceuticals to help with sleep. She tried using a 1:1 vape pen and it was a miracle worker for her for several months. The local dispensary had a sale on it, and she bought some extra. Unfortunately, even though she used it the same way as before, she got very serious anxiety, which obviously didn’t help her sleep. Every time she used the vapes from this same batch, she felt the same extreme anxiety. Sadly, she now had a lot of this product that she couldn’t use because it kept her awake rather than helping her sleep, so she went back to trying other OTC solutions. That’s a problem for both consumers and the industry at large. If people find something that works and provides a desired effect, they need to be able to rely on that consistency every time they purchase the product, leading to similar outcomes and not exaggerating the problem. That’s why I think consistency is so important. We’re taking two steps forward and one back when we have inconsistent products. How do we really grow and expand the availability of cannabis if we lose trust from our consumer base? What a lab can do and what we can do is provide data to cultivators and manufacturers to create that consistency and ultimately allow the market to expand into other demographics that are currently wary and less tolerant of that variance.

Vials of cannabis samples being prepped for collaborative research with the CESC

On a similar note, we have been having a lot of discussions with the CESC [Clinical Endocannabinoid System Consortium] down in San Diego. They are an advanced cannabis research group that we have been working with for over a year. We’ve started looking at the idea of varietals. To be more specific, because I’m not a wine connoisseur, varietals are the pinot noirs, the cabernets and sauvignon blancs of the industry. In the cannabis industry, consumers have indica and sativa, though we still argue over what that concept really means, if anything. But for the sake of argument, let’s say we have this dichotomy to use as a foundational decision tool for consumers- call it the red and white wine of the cannabis industry. How inaccessible would wine be if we just had red or white? Imagine if you went to a dinner party, really liked the wine you were drinking, and the host could only tell you that it was a red wine. You can’t go to a wine store and expect to find something similar to that wine if the only information you have is “red.” At a minimum, you need a category. So that’s what varietals are, the categories. The data that we can produce could help people in the industry who identify and establish the varietals based on their expertise as connoisseurs and product experts to find what those differences are chemically. Similarly, we’re also looking at appellation designations in California. So, we want to help provide tools for farmers to identify unique characteristics in their flower that would give them ability to claim and prove appellation designation.

Aldwin: The GCxGC/MS allows us to find more things besides the typical terpene profile with 20 or 40 terpenes. It allows us to go beyond those terpenes. The issue sometimes is that with a typical one-dimensional GC method, sure you could probably separate and find more terpenes, but the one dimension is not enough to separate everything that coelutes. And it’s not just terpenes. Some terpenes coelute with one another and that’s why people can see this inconsistency. Especially if you use a detector like an FID, we can see the compound limonene on the chromatogram, but there’s another terpene in there that is unknown that coelutes with limonene. So, this instrument is helping us get past the coeluting issue and solve it so that we know what peaks represent what terpenes.

The other bonus with our GCxGC/MS is that the coeluting compounds that were masked behind other terpenes are now revealed. There is a second dimension in the chromatogram where we can now detect some compounds in cannabis that would be hiding behind these large peaks if it were just a one-dimensional GC. Besides terpenes, we’ve found esters, alkanes, fatty acids, ketones, alcohols and aldehydes, as well as thiols. The terpenes are so plentiful in cannabis that these other compounds present at lower levels cannot be seen with just one-dimensional GC. There are just so many compounds in cannabis that the ones in small amounts are often masked. My analogy to highlight the importance of these minor compounds is like a dish; I am from the Philippines and I like chicken adobo. My father does it differently from my mom and someone else will do it differently in a different region. The base of the sauce is vinegar and soy sauce, but some people will do it differently and maybe add some bay leaf, garlic, pepper, or a touch of another spice. It’s still chicken adobo, but it tastes differently. Just like in cannabis, where yes, you have the same amount of THC in two different plants, but it’s still giving you a different experience. Some people say it’s because of terpenes, which is true in a lot of cases, but there are a lot of other volatile compounds that would explain better why certain dishes taste different.

2-D chromatogram showing four peaks separated by the GCxGC. With a traditional 1-D chromatogram, these peaks would coelute and not separate.

Leo: There’s been some recent developments too here that show it’s very significant. It’s like the difference between bland and spicy. And it could be the thiol. We identified a thiol in cannabis at the same time as other scientists reported an article that just came out on this subject.

Aldwin: Thiols are sulfur containing compounds that produce very powerful odors, giving cannabis the skunky smell. Skunks also produce thiols. It is very potent; you only need a little bit. It turns out that yes, that paper described thiols and we also saw them in our GCxGC/MS. These are the kinds of things that the GCxGC can show you. Those very tiny amounts of compounds that can have a very powerful impact. That’s one that we know for sure is important because it’s not just us that’s finding out that GCxGC can detect this.

Not everything is about THC or the high amount of the compounds in the flower. This paper and our concurrent findings indicated that the skunkier smelling strains contained very small amounts of thiols and you can recognize their presence quite readily. It’s not a terpene, but it’s producing a distinct flavor and a powerful smell.

Aaron: Okay, so why is this useful? Why is it so important?

Leo: I would say two things in particular that we know of that are issues currently, both related to scents. We mentioned this earlier. We do know that farmers with breeding programs are trying to target particularly popular or attractive scent profiles, whether it be a gas or fruity aroma. Right now, when they get the flower tested and review the terpene profile, it isn’t enough information to help them identify what makes them chemically distinct. We hear time and again that farmers will say their terpene profile is not helpful in identifying specific scents and characteristics. They are looking for a fingerprint. They want to be able to identify a group of plants that have a similar smell and they want a fingerprint of that plant to test for. Otherwise, you have to sniff every plant and smell the ones that are most characteristic of what they’re targeting. For larger operations, walking through and smelling thousands of plants isn’t feasible.

Once we can identify that fingerprint, and we know which compounds in which ratios are creating the targeted aroma, we can run tests to help them find the best plants for breeding purposes. It’s about reproducibility and scalability.

Another value is helping people who are trying to categorize oils and strains into particular odor categories, similar to the varietals concept we’ve been talking about. Currently, we know that when manufacturers send multiple samples of oils with the same or similar scent to be tested, the results are coming back with significantly different terpene profiles. There is not enough data for them to chemically categorize products. It’s not that their categories are wrong, it’s just that the data is not available to help them find those boundaries.

Those are two issues that we know from conversations with customers that this particular piece of equipment can address.

Aldwin: Let’s start from what we find, meaning if you are using the GCxGC/MS, we are finding more terpenes that nobody else would be looking at. We have data that shows, for example, that certain standards are accounting for 60% or so of total terpene content. So a large percent is accounted for, but there is still quite a bit missing. For some strains there are terpenes that are not in common reference standards. Being able to know that and identify the reason why we have different terpenes in here unaccounted for is big. There are other things there beyond the standard terpenes.

Dr. Anterola working with the GCxGC/MS

What excites me sometimes is that I see some terpenes that are known to have some properties, either medical or antibacterial, etc. If you find that terpene looking beyond the list, you’ll find terpenes that are found in things like hardwood or perfumes, things that we don’t necessarily associate with the common cannabis terpenes. If you’re just looking for the limited number of terpenes, you are missing some things that you might discover or some things that might help explain results.

Leo: It’s also absolutely necessary for the medical side of things. Because of the federal limitations, cannabis hasn’t been researched nearly enough. We’re missing a lot of data on all of the active compounds in cannabis. We are finally starting to move into an era where that will soon be addressed. In order for certain medical studies to be successful, we need to have data showing what compounds are in what plants.

Drs. John Abrams and Jean Talleyrand of the CESC launched the Dosing Project in 2016. They have been studying the impact of cannabis flower for indications such as pain mitigation and sleep improvement, and now more recently mood, and appetite modulation. They categorize the THC & CBD content as well as flower aroma into 3 cannabinoid and 3 odor profiles. They are able to acquire quite a bit of data about how odor correlates with the outcomes. Because they were initially limited in terms of underlying natural product content data, they contacted us when they found out we acquired this equipment in 2020, and have stated that they are certain the data we will now be producing will take their research to the next level of understanding.

Aldwin: For quality control you are looking at specific things that would reflect properties in cannabis. There should be a 1:1 correspondence between properties observed and what we are measuring. The current assumption is that the terpenes we are looking at will tell us everything about how people would like it, with regards to flavor and smell preference. But we know for a fact that the limited terpenes most labs are measuring do not encapsulate everything. So, it is important for QC purposes to know for this particular strain or product, which everyone liked, what is it in there that makes everybody like it? If you just look at the typical terpene profile, you’ll find something close, but not exact. The GCxGC/MS shows us that maybe there’s something else that gives it a preferred property or a particular smell that we can explain and track. In one batch of flower, the consumer experiences it a certain way, and for another batch people experience it another way. We’d like to be able to understand what those differences are batch to batch so we can replicate the experience and figure out what’s in it that people like. That’s what I mean by consistency and quality control; the more you can measure, the more you can see.

Aldwin: Speaking to authenticity as well, in a breeding example, some growers will have this strain that they grew, or at least this is what they claim it to be, but what are the components that make those strains unique? The more analytes you can detect, the more you can authenticate the plant. Is this really OG Kush? Is this the same OG Kush that I’ve had before? Using the GCxGC/MS and comparing analytes, we can find authenticity in strains by finding all of the metabolites and analytes and comparing two strains. Of course, there is also adulteration- Some people will claim they have one strain that smells like blueberries, but we find a compound in it that comes from outside of cannabis, such as added terpenes. Proving that your cannabis is actually pure cannabis or proving that something has added terpenes is possible because we can see things in there that don’t come from cannabis. The GCxGC/MS can be used as a tool for proving authenticity or proving adulteration as well.  If you want to trademark a particular strain, we can help with claiming intellectual property. For example, if you want to trademark, register or patent a new product, it will be good to have more data. More data allows for better description of your product and the ability to prove that it is yours.

Leo: One thing that I think is a very interesting use case is proving the appellations. It is our understanding that California rolled out a procedure for growers to claim an appellation, but with strict rules around it. Within those rules, they need to prove uniqueness of growing products in specific regions. The GCxGC/MS can help in proving uniqueness by growing two different strains in two different regions, mapping out the differences and seeing what makes a region’s cannabis unique. It’s valuable for growers in California, Oregon, Colorado to be able to prove how unique their products are. To prove the differences between cannabis grown in Northern California versus plants grown along the Central Coast. And of course, for people across the world to be able to really tell a story and prove what makes their cannabis different and special. To be able to authenticate and understand, we need to have more comprehensive data about properties in those strains. It could be terpenes, it could be esters or thiols. That’s what we’re excited about.

Aaron: From your perspective, what are some of the biggest challenges and opportunities ahead for the cannabis industry?

Aldwin: Getting ready for federal legalization is both a challenge and opportunity. A challenge because when it is federally legal, there will be more regulations and more regulators. It is also a challenge because there will be more businesses, more competition, that might get into the industry. It is opening up to other players, much bigger players. Big tobacco, mega labs and massive diagnostic testing companies might participate, which will be a challenge for us.

But it’s also an opportunity for us to serve more customers, to be more established at the federal level, to move to interstate commerce. The opportunity is to be ready here and now while other people are not here yet.

Another challenge and opportunity is education. Educating consumers and non-consumers. We have to realize and accept that cannabis is not for everybody, but everyone is a stakeholder, because they are our neighbors, parents or part of the medical establishment. It would be a disservice not to educate the non-consumers.

The medical establishment, they don’t have to be consumers but they need to know about cannabis. They don’t know as much as they should about cannabis and they need to know more, like how it could affect their patients for better or for worse, so they know how to help their patients better. There could be drug interactions that could affect the potency of other drugs. They need to know these things. Educating them about cannabis is a challenge. It’s also an opportunity for us to now come in and say that cannabis is here to stay and be consumed by more and more people, so we better know how to deal with it from a medical perspective.“This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves.”

Law enforcement needs to be educated too. What THC level in the blood indicates impairment? It is still a challenge because we’re not there yet, we don’t have that answer quite yet. And it’s an opportunity to help educate and to find more answers for these stakeholders, so we can have regulations that make sense.

Leo: To Aldwin’s point, the biggest opportunity comes along with federal legalization as well as expanding the customer base beyond the traditional market. Since adult use was legalized in CA, we haven’t yet seen the significant expansion of the consumer population. We’re primarily seeing a legal serving of the market that already existed before legalization.

The reality is cannabis can be used in different ways than what we think of. We know it has medical benefits and we know it is enjoyed recreationally by people looking for high THC content and the highest high. But there is also this middle ground, much like the difference between drinking moonshine and having a glass of wine at dinner. The wine at dinner industry is much bigger than the mason jar moonshine industry. That’s really where the opportunity is. What’s the appeal to the broader market? That will be a big challenge, but it’s inevitable. It comes from everything we’ve talked about today, consistency in products, educating people about cannabis, normalizing it to a certain degree, varietals and appellations.

As an entrepreneur, I’m looking at this from a business perspective. Everyone talks about the hockey stick growth chart, but it is a very wavy hockey stick. I expect to see very significant growth in the industry for a while, but it will have a lot of peaks and valleys. It’ll essentially be whiplash. We are seeing this in California right now, with sky high prices in flower last year down to bottom of the barrel prices this year. We have to all figure out how to hang on. This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves. The good ones will be fun and the bad ones will be painful and we know they are coming again and again and again. That’s the biggest challenge. People say ‘expect tomorrow to look a lot like today,’ but you really can’t expect tomorrow to look anything like today in the cannabis industry. Tomorrow will be totally different from today. We need to figure out, within all this chaos, what can we hang on to and keep riding the upward trajectory without getting thrown off the bronco.

A Conversation with the Founders of Veda Scientific: Part One

By Aaron G. Biros
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Leo Welder, CEO of Veda Scientific, founded the business with Aldwin M. Anterola, PhD in July of 2019. A serial entrepreneur with experience in a variety of markets, he came to the industry with an intrigue for cannabis testing and analysis. After teaming up with Dr. Anterola, co-founder and chief science officer at Veda Scientific, they came together with the purpose of unlocking possibilities in cannabis. From the beginning, they set out with a heavy scientific interest in furthering the industry from a perspective of innovation and research.

Through discussing their clients’ needs and understanding their complex problems, the two realized they wanted to start a lab that goes well beyond the normal regulatory compliance testing. Innovation in cannabis looks like a lot of things: new formulations for infused products, better designs for vaping technology or new blends of genetics creating unique strains, to name a few. For the folks at Veda Scientific, innovation is about rigorous and concentrated research and development testing.

With the help of some very sophisticated analytical chemistry instruments, their team is working on better understanding how volatile compounds play a part in the chemometrics of cannabis. From varietals and appellations to skunky smells, their research in the chemistry of cannabis is astounding – and they’ve only begun to scratch the surface.

In this two-part series, we discuss their approach to cannabis testing, their role in the greater industry as a whole and we go down a few cannabis chemistry rabbit holes and find out that what we don’t know is a lot more than what we do know. In part one, we get into their backgrounds, how they came into the cannabis industry and how they are carving out their niche. Stay tuned for part two next week where we delve deep into the world of volatile compounds, winemaking, the tastes and smells of cannabis and chicken adobo.

Aaron G. Biros: Tell me about how you and your team came to launch Veda, how you entered the cannabis space and what Veda’s approach is to the role of testing labs in the broader cannabis industry. 

Leo Welder, CEO of Veda Scientific

Leo Welder: I’m an entrepreneur. This is my third significant venture in the last fifteen years or so. So, I was intrigued by cannabis legalization broadly, because it is such a unique time in our history. I was always interested in participating in the industry in some way, but I didn’t see where would be a good fit for me. I used to meet monthly with a group of friends and fellow entrepreneurs for dinner and discussions and one member started working on the software side of the industry. He mentioned the testing element of cannabis in one of our meetings. I latched on to that and was intrigued by the concept of testing cannabis. I began to research it and found the role that testing plays in the cannabis industry is really significant. I found out that regulators rely pretty heavily on labs to make sure that products are safe, labels are accurate and that consumers have some protections. So, I thought that this is a space that I thought I could really find a calling in.

So, from that point I knew I needed to find a subject matter expert, because I am not one. I have business skills and experience in some technical fields but I am not a cannabis testing expert by any means. So, with that I started to look at a few different markets that I thought may have opportunity for a new lab, and I came across Aldwin’s business; he had a cannabis testing lab in Illinois at that time. I reached out to him, talked to him about my vision for the space and his thoughts and his vision and we really started to come together. From there, we researched various markets and ultimately chose to approach Santa Barbara County as our first foray together into the cannabis testing market.

Aldwin M. Anterola: As Leo mentioned, he was looking for a subject matter expert and I am very much interested in plant biochemistry. Which means I like to study how plants make these compounds that are very useful to us. For my PhD [in plant physiology], I was studying how cell cultures of loblolly pine produce lignin. Our lab was interested in how pine trees produce lignin, which is what makes up wood. Wood comes from phenolic compounds. You’ve probably heard of antioxidants and flavonoids – those are phenolic compounds. After my PhD, I wanted to do something different so I decided to work with terpenes.

I picked a very important terpene in our field, an anti-cancer compound called Taxol, produced from the bark of the yew tree. You have to cut trees to harvest it. We have ways of synthesizing it now. But at that time, we were trying to figure out how the tree produces that terpene. Of course, I’m interested in any compound that plants make. My interest in terpenes led me to cannabinoids which turn out to be terpenophenolics, thus combining the two interests in my professional field.

Aldwin M. Anterola, PhD, Co-Founder and Chief Science Officer at Veda Scientific,

So that’s the scientific and intellectual side of why I became interested in cannabis, but practically speaking I got into cannabis because of a consulting offer. A company was applying for a cultivation license, wanted to have a laboratory component of their business in their application, and hired me to write that part of their application. I was very familiar with HPLC, and had a GC/MS in the lab. I also have a background in microbiology and molecular biology so I can cover every test required at that time, and I knew I could research the other analytical techniques if necessary.

So, they did not get the license, but I figured I’d take what I wrote, once I received permission, and set up an independent laboratory together. But it’s hard to run a lab and be a professor at the same time. Also, the busines side of running a lab is something that I am not an expert in. Fortunately, Leo found me. Before that, I really got excited about this new industry. The concept of cannabis being now accessible to more people is so interesting to me because of how new everything is. I wanted to be involved in an industry like this and help in making it safe while satisfying my curiosity in this new field of research. As a scientist, those are the things that excite us: the things we didn’t have access to, we can now do. It opens up a whole new room that we want to unlock. It was my intellectual curiosity that really drove me. This opened up new research avenues for me as well as other ventures if you will. How can I be more involved? I thought to myself.

SIU boasts an impressive cannabis program, thanks largely to Dr. Anterola’s work there.

Back in 2014, I introduced cannabis research to our university [Southern Illinois University] and set up an industrial hemp program, which was DEA-licensed I gathered faculty that would be interested in studying hemp and cannabis and we now have a whole cannabis science center at the university. I teach a course in cannabis biology and because I also teach medical botany to undergraduate students, I was able to introduce [premed] students to the endocannabinoid system. Anyway, I can go on and on.

Outside of that I became involved with the AOAC and ASTM, and became a qualified assessor for ISO 17025:2017. I have been a member of the American Chemical Society since 2000 but there were no cannabis related activities there yet until relatively recently. But when they had the new cannabis chemistry subdivision, I am happy to participate in there as well . There are many avenues that I took to begin dabbling with cannabis, be it research, nonprofits, teaching, testing and more. Cannabis has basically infiltrated all areas of what I do as an academic.

Leo: I read his resume and I was like this is the guy! So back to your question, what’s Veda’s role as a testing lab in this space? What are we trying to build? We spent a lot of time trying to figure out what we wanted to be in this space. We came to understand that labs are not the tip of the spear for the market; that would be the growers, the retailers and the processors. We are a support, a service. We see ourselves as a humble, but competent guide. We provide the data for the tip of the spear, the people pushing the industry forward with support, data and the services to make sure they have the tools they need to build these great companies and great products with good cultivation practices and more, leading everyone to the next level of the cannabis industry. Our job is to support innovation, to provide quality compliance testing, to of course ensure safety, while also providing great R&D to these innovative companies.

Aldwin: I’d like to add a bit to that thought. Okay so that’s who we are, but what are we not? Because as Leo said I had a testing lab before we met [Advanced Herbal Analytics]. From there, I approach it as safety testing, making sure that before it gets to the end consumer, we are sort of like gate keepers keeping consumers safe. That’s one side to it, but we are not the people who are trying to make sure that none of the products get to the market. For some, that’s how we’re treated as.

People often look at testing labs like the police. We are not the people trying to limit products to market. Our approach is not to find faults. There is another way of being a testing lab that is less about finding faults in products and more about finding uniqueness. What makes your product different? With this new approach, we are much more focused on helping the best products make it to the shelves.

Aaron: Given that all state licensed labs have to provide the same tests as the other labs in that state, how does Veda differentiate itself?

Leo: Location was the first thing. We picked Santa Barbara County intentionally. We knew that some of the biggest operators, some of the most forward-thinking innovators were setting up shop here. Looking down the road, not just this year or next year but very long term, we wanted to start building a great, sustainable company. We wanted to build a brand that those kinds of companies would be receptive to. Building better and greater products. There’s one other lab in the county and that’s it. Whereas there are clusters of labs in other parts of the state. Part of the draw to Santa Barbara for us was that it is such a small, tight-knit community. We have worked very hard to build relationships in our community and to understand their challenges, helping them however we can.

Location and relationships. Getting to know the challenges that different size customers face, be it our greenhouse customers versus outdoor customers, or large-scale operations versus smaller manufacturing operations, the challenges are all different. Some people care about turnaround times, some more about R&D. If we understand our client’s problems, then we can provide better service. We see ourselves as problem solvers. We lean heavily on our technical team members like Aldwin, who not only have tremendous amounts of experience and education, but also great networks to utilize when a customer needs help, even when it falls outside of our local expertise.

The GCxGC/MS instrument, used for Veda’s advanced R&D testing

Last but certainly not least is the advanced R&D testing that we do. When we first started, we started talking to farmers and manufacturers trying to understand their challenges. What data were they not getting? How would a testing lab better serve them? So, we started investing strategically in certain instruments that would allow us to better serve them. We’ll get into this later as well, but we invested in a GCxGC/MS, which allows us to get more visibility into things beyond the typical panels, like more terpenes and other volatile compounds including thiols and esters. We did that because we knew there is value in that. The data our customers were getting prior just wasn’t enough to put together really great breeding programs or to manufacture really consistent products, you know, to move toward that next level of innovation in the industry.

Aldwin: Leo mentioned advanced R&D and it’s basically the same approach that I mentioned before. It’s not just telling you what you can and cannot do. It’s about asking them what do you want to do and what do you want from a lab? If we have a problem, let’s see if we can solve it. That’s how the GCxGC/MS came into play because we knew there was a need to test for many terpenes and other volatile compounds. The common complaint we received was why two terpene profiles differ so much from each other, even from the same genetics.

This is something that would actually give the customer, the cultivator or the manufacturer: data about their product that they can actually use. For consistency, for better marketing and other reasons. We are trying to help them answer the questions of ‘how can I make my product better?’

You know, for example, clients would tell us they want something that has a specific taste or smells a certain way. Nobody is telling them what makes the flavor or smell. There is a need there that we can fill. We are trying to provide data that they, the customers, need so that they can improve their breeding programs or their formulations. Data they can use, not just data they need in order to comply with regulations. They would ask us what we can do. We listen to our customers and we try and help as best we can. We don’t know every answer. We are discovering there is a lot more to terpenes than what you can find on a traditional one dimensional gas chromatogram. Some of the terpene data that our clients had previously is not really actionable data, which is where the GCxGC/MS is helping us.


In part two, we delve deep into the world of volatile compounds, winemaking, the tastes and smells of cannabis and chicken adobo. Click here to read part two.