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From CBD to THCV: Clinical Trials & ECS Brands

By Aaron Green
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The cannabinoid industry has faced an uphill battle from the beginning due to a lack of reliable scientific awareness about cannabinoids, fueled by decades of the hemp plant’s status as an illegal Schedule 1 drug. Today, scientists finally are free to explore the hemp plant’s 115+ cannabinoids and their relationships with the body’s endocannabinoid system. One cannabinoid, THCV, is currently undergoing scrupulous research.

ECS Brands is an established provider of whole-plant extracts. In the first-ever clinical trial for an organic THCV-rich extract, ECS received support from the National Institutes of Health and guidance from the Mayo Clinic to assess its potential for weight loss, anxiety treatment and other therapies using Nitro-V Hemp Extract, an ECS Brands product containing high concentrations of THCV, CBDV and other cannabinoids. Early outcomes of the 90-day, randomized, double-blind placebo-controlled human study were recently released. 100 out of 100 people lost weight, making no changes to exercise while taking the product for 90 days.

We interviewed Arthur Jaffee, Founder & CEO of ECS Brands. Prior to founding ECS, Arthur was co-founder of Elixinol, a company manufacturing and distributing industrial hemp-based products. Arthur took Elixinol public on the Australian stock exchange in 2018.

Aaron Green: How did you get involved in the cannabis industry?

Arthur Jaffee, Founder & CEO of ECS Brands

Arthur Jaffee: I originally was planning on starting a fitness equipment company. I got introduced to my partner at Elixinol, Gabriel, who my old physical therapist at University of Colorado said I had to meet. By the end of our lunch meeting, we shook hands in agreement to partner up on the fitness equipment concept. The timing happened where he got this opportunity to distribute CBD just following our handshake partnership. I didn’t know what it was at the time. He asked me if I wanted to join and get involved. I did my research into the benefits and discovered CBD’s anti-inflammatory and neuro-protective benefits, which for me was relevant given my football experience. I quickly realized what the vast potential CBD could offer with inflammation, neuroprotection and so many of the health and safety concerns arising from contact sports at the time. So, ultimately the opportunity presented itself through a friend of a friend in Australia who had a supply chain in Europe. This was right when CBD first appeared in the media in 2014. It was almost like it just fell into my lap.

I’ve been fortunate to really see that transition, and the evolution of the industry. Back then was probably the most valuable time because growth was so slow. Nobody knew what CBD was back in 2014. The primary demographic was cancer patients and epilepsy patients which presented a significant challenge to develop sales and marketing materials and communicate compliantly. Our first hire was a Medical Doctor to communicate in a more compliant fashion. I had to learn everything there was about the science and the medical research that existed at that time. For me, that was very valuable.

The valuable learning experiences from the early days of the industry is what laid the foundation today with ECS brands where we are focused on education promoting awareness of the endocannabinoid system to take it a step beyond just CBD because in order to understand what constitutes a quality product, or why CBD can have all these various benefits for people, you must first understand how the body is naturally configured to receive and respond to these amazing phytochemicals such as CBD. CBD is just one of hundreds of phytonutrients that the human body is designed to use. The endocannabinoid system is so significant in the grand scheme of things, because once you start accepting that the system is your overarching regulatory system in the body, we can start to look at the endless therapeutic potential.

Green: Being an early player in the CBD space, how would you say you’ve evolved over time to where you’re at today?

Jaffee: Innovation. That’s what really drove me to start ECS brands. Back in 2014, I originally co-founded Elixinol. After we took Elixinol public on the Australian exchange in the very beginning of 2018, there was a shift in direction away from innovation. Nearly all emphasis was placed on just doing what we’re doing better – meaning improving margins. In such a new and young industry and being a pioneer, you don’t get many opportunities to discover and create something for the first time. So, the past three years with ECS brands is with a heavy focus on innovation and technology.

Green: How do you think about innovation for the endocannabinoid system?

Jaffee: One of the early discoveries for me that was most inspiring, was research that evaluated endocannabinoid receptor sites, basically little keyholes for cannabinoids to perfectly fit in – that are made for cannabinoids. When evaluating the number of receptor sites in different individuals experiencing stress and illness it showed there was a higher concentration of receptor sites in those that were sick and experiencing systemic stress. To me, that was that was powerful because if that doesn’t communicate the body’s need for cannabinoid nourishment to heal and restore back to homeostasis as a natural and involuntary response really motivated me to play a part in getting quality cannabinoid products out to the masses and specifically those in most critical need. Our first interaction with cannabinoids is in mother’s breast milk, the cannabinoids that our bodies naturally produce. After breastfeeding, our diets are completely stripped of virtually all cannabinoids, leaving the endocannabinoid system starving, and likely leading to many of the most common and chronic health deficiencies that causes detriment to so many. Rather than cannabinoids, we then get introduced to pharmaceuticals. The writing is on the wall – this must get accepted and integrated into our society.

The Nitro-V Hemp Extract, an ECS Brands product

When it comes to innovation surrounding the public system it requires research and requires scientific evidence. It requires functional products because you can have all these great benefits, but if you don’t have efficient and effective ways of delivering these chemicals to the body, it can almost be meaningless. It’s a delicate balance between consumer appeal, functionality and efficiency when it comes to the delivery into the body. We’re focusing on delivery systems, making things more bioavailable and integrating other natural botanicals that react and influence the system in similar ways as there are more than just cannabis-derived cannabinoids that can create positive impact and ultimately alter the way that the endocannabinoid system can regulate.

Green: An important aspect of innovation is clinical validation. How do you think about clinical trials and designing clinical trials for products?

Jaffee: Clinical trials are instrumental and required to validate claims because otherwise, it’s just speculation. Directional application without the clinical evidence to support in the appropriate way is setting yourself up for failure. Designing a clinical trial is just as important as performing the trial. If it’s not set up right, it can be a waste of time and money. Trials really need to be held to the gold standard of double-blind placebo controlled and thoughtfully organized.

We did organize a clinical trial at the beginning of this year, and it was incredible. We learned so much about a unique extract of ours that’s naturally rich in THCV and CBDV. We intentionally set it up to be a very broad and encompassing study. I personally wanted to see the different mechanisms and how the endocannabinoid system responded and worked together with other systems in the body. We evaluated a broad range of measurements, with complete safety tox study – blood panels to test every organ – measuring kidney enzymes, liver enzymes, ALT, AST, ALP, bilirubin, albumin, creatinine as well as cholesterol – with HDL, LDL and triglycerides, GFR and Complete Blood Count. We also measured blood sugar hemoglobin A1C and five major inflammatory markers of IL-1, IL-6, C-Reactive protein, Homocysteine and TNF. In addition to performing a full safety run-up of the product, we also measured weight, BMI, girth, questionnaires for anxiety, appetite, pain, mood and finally – we bought brand new Fitbit Versa 3’s for all 125 study participants which gave us objective measurements for REM sleep, deep sleep, awake time, systolic/diastolic BP, SpO2 blood oxygen levels and daily caloric output values – which was really cool because it provided tangible objective evidence that participants weren’t going out and secretly exercising. So, we had 100 people taking the product and then 25 on placebo.

Green: Was this a safety trial?

Jaffee: Yes. The primary endpoint study was safety. That’s how we enrolled participants – as a general product safety study for a natural product. I decided to include a lot of additional efficacy measurements, including weight loss, measuring body mass index as well as heart rate for all the blood markers that we looked at. In addition to that we purchased brand new Fitbit Versa 3’s for the entire study group, which was great because they gave us objective measurements for three different sleep readings, deep sleep, REM sleep and rest asleep as well as lower output and blood oxygen levels.

We saw everything kind of working together. We saw deep sleep improve 300% within two weeks. We saw blood sugars come down significantly from those that are considered high, pre-diabetic ranges of hemoglobin A1C. You saw inflammatory markers reduce to normal levels, with 92% efficacy, which basically just means that those who were experiencing inflammation by means of these major inflammatory markers, after 90 days, 92% of subjects were reduced to nominal ranges. So, it was really fascinating to see how, with all the different measurements. that we can correlate different objective measurements. Then, we did subjective measurements too. We had standardized questionnaires for anxiety and pain, as well as an internally developed appetite and cravings questionnaire.

Green: Based on the results of that safety study, are there particular disease states you want to target going forward?

Jaffee: Moving forward, we are interested to look at each blood sugar and Hb A1C. I think one of the most exciting and popular successes of the study was the fact that we had 100 out of 100 participants lose weight without diet and exercise. Because we incorporated the Fitbit, we were able to obtain objective evidence that participants weren’t going and secretly working out. The Fitbit provided a caloric output value. It is basically an algorithm taking the number of steps taken, stairs climbed, heart rate, movement, etc. to populate a caloric expenditure value, which remained completely stable in our study population. Subjects were specifically instructed NOT to change any lifestyle behavior – specifically diet, exercise, and sleep, and that if any changes were to occur naturally that was acceptable. What this ultimately told us is that diets changed, and metabolisms increased, and we were able to support that notion with the appetite and cravings questionnaire that we had participants fill out where cravings did reduce and desire for sugary foods reduced 63%. These were questions that we internally developed for the appetite and cravings questionnaire, which were based on feedback that we received prior to the study.

Green: What are in your personal life or in cannabis are you most interested in learning about?

Jaffee: It’s changed a little bit over the years. My biggest passion I would say is performance. I think the hemp plant has so much to offer when it comes to superior nutrition and healing. Once I learned about the benefits and the potential of hemp with its food applications and specific protein composition – the powerful oxygenating properties of Hemp Seed Oil, the brain health properties it encompasses, and of course the cannabinoid potential… It got me very motivated to commit myself to this plant. It wasn’t long before learning all the incredible industrial applications and solution the plant also offers – such as plastics, textiles, biofuel, building materials – and as an environmental science major – learning about these amazing applications got me that much more excited, but knowing and trusting that CBD would be the first stepping stone in an industry that needs to evolve into all the amazing sustainable applications because it’s all it’s all very real. It will get there, but it won’t be easy.

Green: Thanks Arthur, that concludes the interview.

Jaffee: Thanks Aaron

Vaporizer Technology Innovation & Hanu Labs

By Aaron Green
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Conduction heating is a method used in most dab rigs and vape pens that relies on heating concentrate or flower on a metal surface to vaporize cannabis compounds for consumption. Care must be taken with conduction heating to avoid overheating the material, resulting in combustion or decomposition. Convection heating (think of heating food in an oven) can also be used to vaporize cannabis compounds and has the benefit of being able to control the heating temperature of the material more precisely.

Hanu Labs recently announced the launch of their Hanu Labs EVO Petra. The tabletop device leverages their convection heat-based Perpetual Heat Thermal Technology, which avoids combustion while efficiently extracting the desired compounds from cannabis flower or concentrates.

Prior to becoming the CEO of Hanu, Ricardo worked in sales at Jetty Extracts where he helped to build the Northern California territory. Ricardo is also a classically trained French chef who used to run a cannabis tourism company in California.

Aaron Green: How did you get involved in the cannabis industry?

Ricardo Willis, CEO of Hanu Labs

Ricardo Willis: I moved to California in 2016. I was a professional chef at the time and had just finished up my master’s degree after eight years of schooling. My business partner and I decided we wanted to get into the cannabis space. So, we started a cannabis tourism business. Cannabis tourism wasn’t in the Bay Area at the time. We were kind of first and we were about two years ahead of legalization. We ran a few tours and we started to get into the cannabis game. I found out I didn’t know as much as I thought I did about cannabis. So, I decided to go and work for Jetty Extracts and that eventually led to where I’m at today.

Green: What was your motivation for joining Jetty?

Willis: Education. I knew about flower, but I did not know as much about the manufacturing process. I was first exposed to concentrates in San Francisco and I was really fascinated by it. I wanted to learn more, because I knew that this was going to be the wave at the time. Coming from the east coast, I had never seen a vape pen. So, I come out to Cali, and I see all these different dabs and I’m like, “I need to know more about this.” Jetty was an opportunity for me to educate myself while also helping them build their Northern California division that had only been around for a few years, and they were trying to expand. It was a great opportunity working for those guys, I learned a lot.

Green: I got a chance to see the Petra in action last night. It’s a bit different from your standard dab rig. Can you talk about the standard dab conduction heating versus the Petra and convection heating?

The mica-encapsulated chamber and heating element

Willis: Think about your standard dab rig in the sense of taking a hot plate and dropping your dab onto that hot plate. It just sits there and begins to bubble and then evaporate from the heat. With the Petra, you take in all those same components, but you’re putting the concentrate into this mica-encapsulated chamber, where you have an all-glass air path that is one of the best surfaces for heating, and one of the safest. Those components with our perpetual heating system allow the dab rig, when we drop that nail in or we drop a basket for flower, that convection air circulates around the actual product. The oil begins to sublimate, or the vapor begins to make it through the flower, and it releases all those molecules that are found in the cannabis plant. And because of our glass air hydro tubes, when you pop those on, it basically filters it through water, and gives you one of the fastest and cleanest hits you’ve ever experienced.

Green: You mentioned flower as well as concentrates. Am I correct in hearing that you can also use flower with the Petra?

Willis: Yes. Dual functionality was one of the things found in our original model, the Vape Exhale that we first released nine years ago. I think that that’s very important for products. If a customer is going to spend anywhere between $300 to $500 retail, you need to give them more bang for their buck. Being able to vaporize flower and concentrates fits for the markets that we’re going into. People are consuming flower and concentrates at about the same percentage rate. So, we want to make sure that our devices can give the customer the ability to do both, either at home or on the go.

Green: So, you worked in the cannabis tourism industry. One of the trends we’ve got coming up in California is consumption lounges. How do you see the consumption lounges evolving over time? What are the challenges you see in California?

Willis: It’s a little different in Southern California versus Northern California. We’ve had consumption lounges in San Francisco, as well as Oakland for the past three years. We outfitted the entire lounge with VapeExhales at Barbary Coast, one of our early clients that we work with, which is downtown San Francisco. For us, we knew this is a space that would be thriving.

The Hanu Labs EVO Petra

I’m a big fan of the lounges, because I think people need a safe place where they can go to smoke. Those lounges offer that to people. It also gives them a chance to experiment with different technology and actually test it out before purchasing. Because of my hospitality and restaurant background, I’m always looking for the opportunity for people to become repeat customers. If you offer these things like consumption lounges, instead of people going to bars, they end up at your lounge after work. I think that is something that’s going to continue to grow.

I do think some of the challenges are going to be around single servings. A person doesn’t need to buy a full gram. Maybe they just need to buy a quarter of a dab or something like that. Companies will need to identify those potential pain points in that process, and then offer those smaller products that can be enjoyed while at the lounge.

Green: There’s a certain experience around the Petra. Where it’s really like a centerpiece of the table. How did you think about designing the user experience and designing around that conviviality?

Willis: That’s a great question. For the Petra, what we decided to design was slightly different from the VapeExhale. With the VapeExhale, the purpose of the device wasn’t super obvious, but the Petra has more of a centerpiece design. I’m a big fan of technology, so when I was designing the Petra, I was thinking about the KitchenAid mixer. That may seem strange, but the KitchenAid mixer is something that as a cook, either at home or in a restaurant, they own these things literally for 20 years. It has a very long product life. I wanted the Petra to be the same. I wanted it to look more like an appliance, I wanted it to be built with stability and durability so that when the customer purchases that product, it becomes a centerpiece that they can set up. If your grandkids come in, they see your vaporizer, it becomes more of an educational opportunity, and less about feeling embarrassed about your cannabis pieces. So, for me, design is all about ease of use, but also being appealing to the eye. The Petra is its own show, and it deserves to make a splash.

Green: What in your personal life or in cannabis are you most interested in learning about?

Willis: I am very interested in the customers. I started off in customer service when I was around 16 years old. The one thing that I learned is that the customer is the most important part of the sales cycle. I think that sometimes people focus on the B2B side and making our business partners happy, but my focus is, and always will be on the customers. I need to understand what customers want and how they want it. I’m intrigued by the science behind customer acquisition and want to learn more about how to make my customers happy. If they want cheaper pricing, I’m going to find a way to develop products to give them what they want at the price point they want. There is always going to be a customer who wants premium, or mid-tier or a customer who just wants something fully functional. Maybe they want something that provides the right experience for them, and they don’t have to break the bank to get it.

Green: Thanks Ricardo. That concludes the interview.

Willis: Thanks, Aaron.

Cannin Commentary

3 Cannabis Stocks That Can Gain Over 50% According to Analyst Estimates

By Cannabis Industry Journal Staff
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Welcome to the Cannin Commentary Column. We’re happy to announce our partnership with Cannin Investment Group, a cannabis investment analysis firm. In this new column, we will provide readers with a taste of Cannin’s insights and analysis that they offer to their members. Throughout the new installments of this column, you’ll find articles that will touch on investment tips, trends, predictions, market updates and more.

Companies in the cannabis sector have the potential to increase your wealth at an enviable rate over the upcoming decade. But what are the 3 cannabis stocks that can gain over 50% according to analyst estimates?

The wave of cannabis legalization sweeping through the U.S. right now as well as the prospect of decriminalizing or even legalizing adult-use will be key drivers for licensed producers.

Here, we take a look at three cannabis stocks in Columbia Care, Green Thumb Industries and Cresco Labs that should be on your buying radar right now. Each of these stocks is also trading at a deep discount according to Wall Street estimates, allowing investors to derive market-beating gains in the next year.

Columbia Care

U.S.-based multi-state operator, Columbia Care (OTC: CCHWF) is valued at a market cap of $1.12 billion. The company has already increased revenue from $77.4 million in 2019 to $179 million last year.

Now, Wall Street expects sales to more than triple year over year to $625 million in 2021 and surpass $970 million next year. These stellar growth rates in revenue should allow Columbia Care to improve its bottom-line from a loss per share of $0.48 in 2020 to earnings per share of $0.3.

Columbia Care has a presence in 18 jurisdictions across the U.S. and Europe where it operates 31 cultivation and manufacturing facilities.

The company generated $110 million in revenue in Q2 which was 232% higher than the prior-year period. Columbia Care has 73 active dispensaries and another 26 under development, enabling it to target a rapidly expanding addressable market that is forecast to touch $31.6 billion by 2026.

So, is Columbia Care a cannabis stock that can gain over 50%? Well, analysts tracking Columbia Care stock have a 12-month average price target of $9.38 for the stock which is more than 200% higher than its current trading price.

Green Thumb Industries

A cannabis giant trading 46% below its all-time high, Green Thumb Industries (OTC: GTBIF) is valued at a market cap of $4.4 billion. Headquartered in Illinois, Green Thumb Industries has 13 manufacturing facilities, licenses for 111 retail locations and currently operates in 14 domestic markets.

In the second quarter of 2021, the company’s revenue rose by 85% year over year to $222 million – driven by strong demand in Pennsylvania and Illinois. The Q2 of 2021 was also the fourth consecutive quarter where Green Thumb reported a profit, with a net income of $22 million compared to a loss of $13 million in the prior-year period.

Green Thumb currently has 65 retail stores and just opened a third store in the state of New Jersey which is a market that recently legalized cannabis for adult use. While retail sales in New Jersey are expected to begin next year, Green Thumb’s presence in the medical space will enable the company to gain traction in the highly competitive adult-use cannabis vertical as well.

So, is Green Thumb Industries a cannabis stock that can gain over 50%? Well, analysts expect Green Thumb stock to rise by 95% in the next 12-months given its average price target of $37.54.

Cresco Labs

The final stock on our list is Cresco Labs (OTC: CRLBF), another cannabis heavyweight valued at a market cap of $2.16 billion. A vertically integrated cannabis operator, Cresco Labs currently has 40 dispensaries in 10 states and has grown its sales from $43 million in 2018 to $476 million in 2020.

Most states have a limit on the licenses they are allowed to issue and this barrier to entry allows Cresco and peers to enjoy a competitive advantage in the markets they operate in. Cresco Labs reported revenue of $210 million in Q2, a rise of 123% year over year.

It reported a net profit of $2.7 million in Q2 compared to a loss of $41 million in the prior-year quarter. Cresco expects to generate $1 billion in sales by the end of 2021, making it among the first cannabis companies to reach the milestone.

We believe Cresco is certainly a cannabis stock that can gain 50%. Wall Street expects Cresco Labs stock to gain over 60% compared to its current trading price.

Canopy Growth Acquires Wana Brands: An Interview with Nancy Whiteman

By Aaron G. Biros
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On October 14, Canopy Growth announced their plans to acquire Wana Brands, the number one cannabis edibles brand based on market share in North America. The two companies entered into an agreement that gives Canopy the right to acquire 100% of the membership interests of Wana Brands (a call option to acquire 100% of each Wana entity) once a “triggering event,” such as when plant-touching companies begin trading on major US stock exchanges or full federal legalization, occurs.

As part of the agreement, Canopy Growth makes an upfront payment of $297.5 million to Wana Brands. Until the United States moves on cannabis legalization or companies can start trading on U.S. exchanges and Canopy uses the call option to acquire Wana Brands, they don’t get any voting or economic interest in Wana Brands. The two companies are essentially operating completely independently of each other until the US legalizes cannabis.

Nancy Whiteman co-founded Wana Brands in 2010 and since then the company has expanded significantly. Following the legalization of adult-use cannabis in Colorado, their sales skyrocketed. Over the next few years, Whiteman oversaw the company’s expansion into a number of new states. In 2016, they moved into Oregon’s market and quickly grew their brand presence, seemingly overnight. Then they expanded into Nevada, Arizona and Illinois in 2017. After that the company made a major East Coast push, expanding into Maryland, Florida and Massachusetts, with other major northeast markets expected to be added soon. The brand now has products available in twelve US states and nine Canadian provinces, with plans to add four additional states by the end of the year.

Nancy Whiteman, CEO & Co-Founder of Wana Brands

Shortly after the announcement, we sat down together over coffee in Las Vegas to discuss Whiteman’s journey to success, her plans for the company’s expansion and what the future might hold for Wana Brands.

Aaron G. Biros: First of all, congratulations on the acquisition. As a co-founder and CEO, it must be amazing to see the success of your company and all you’ve accomplished. How do you feel?

Nancy Whiteman: I feel ecstatic. I am so excited and so proud of what Wana has accomplished. Just all around a great feeling.

Biros: What was it like leading up to this moment? From the inception of the business, did you ever have any doubts you’d make it this far?

Whiteman: A thousand times. Absolutely. Anyone in cannabis that tells you they didn’t have any doubts is probably not being very honest. I had been thinking about partnership for a while. I felt the timing was right because of a variety of reasons, but also the possibility of federal legalization. I wanted to make sure that Wana was really going to be well positioned for future growth. One of the things that I said in our employee meeting – I quoted the old proverb of ‘If you want to go fast, go alone, but if you want to go far, go together.’ We’ve been going it alone for eleven years and we’ve gone very fast. But I want Wana to continue to be a major player in the industry and to go far. I really felt that this was the time in the industry to strike a partnership.

So that’s a little bit of the thinking behind it. I think when there is federal legalization, there is going to be a host of competitors entering the industry that are going to be unlike anything we’ve faced before. I think it’s going to be challenging for independent brands to scale as rapidly as they’re going to need to scale to compete against all of this new competition on their own. So that’s the why behind the timing of it.

Canopy_Growth_Corporation_logoIn terms of why Canopy, I’ve known Canopy for quite a while. I met them when we were looking for partners about three and a half years ago. We did not end up putting together a deal at that point in time, but I did get to know the company quite a bit. Since then that company has changed significantly with leadership changes and became a very different company with the Constellation Brands investment behind them.

When I think about the future of the industry and particularly post-legalization, I have certain things that I am looking for in partners. Of course, I am looking for financial strength in a partner. I was really looking for a company that has a very long-term perspective on the industry, with both the proper resources and the proper mindset to make long-term investments for the future. And then my belief is that post-legalization, we’re going to see radical changes in the industry including where products are cultivated in a global market, more distribution outside of dispensaries – and I think liquor stores could be a likely form of distribution at some point in time, so the relationship with Constellation was very interesting and appealing to me. But all of those things wouldn’t mean as much to me if I didn’t feel we didn’t have a good fit in terms of our shared values and how we saw the industry. We spent a lot of time talking about that and I think one of the aspects that really attracted me to Canopy was that we are very aligned on how we see the future of the industry shaping up. Certainly, I think there is a wonderfully viable position for cannabis as an alcohol replacement, however we also have a lot of focus on innovation and the health and wellness aspects of cannabis. I was really looking for a partner that felt the same, and it ended up that we really were aligned on those values.

Biros: What does it look like going forward? Since you’re staying on board, how will your new role change?

Whiteman: My new role doesn’t change at all actually. I woke up last Monday—the week after the big announcement–and it felt very normal getting back to work and having my usual meetings. This was my fifteen minutes of fame and thankfully its diminishing so now it’s just back to work as usual.

But moving forward, we have big plans. Wana is launching in four new markets over the next couple of months, we’re in discussions to launch in an additional six markets, and we have very robust innovation pipeline. So, we’re just really busy right now just executing on our strategy. I am looking forward to getting to know our new colleagues at Canopy better and exploring different collaboration possibilities.

I feel very optimistic. I was thrilled our employees were delighted with the news and morale is very high. The feedback from the rest of the industry has been really positive and overall, I am feeling very good about this decision.

Biros: So you mentioned some expansion plans for four new markets in the next few months. How does the acquisition help Wana Brands expand?

Whiteman: You know we haven’t announced the new states so I can’t speak to those publicly yet. They were all in the works before this deal and are currently in the process of being onboarded. Where it will get interesting is how this deal impacts new states that we move into. Until Canopy decides to exercise the call option [to acquire 100% of membership interests in each Wana entity], we are still an independently owned and run company. So we are still going to be looking for the best partners that we can find in new markets, and the Canopy connection will certainly be helpful to us. But to your point about the plans, we’ll be announcing those new market expansions in the coming weeks.

Biros: As a woman leader with an extremely significant position in the cannabis industry, do you have any advice for young aspiring entrepreneurs, women leaders or other women in the cannabis space?

Whiteman: I do. I posted something on LinkedIn the other day and I’m going to make the same comment to you as I made in that post because I think it’s important and particularly important for young women. People have said a lot of nice things about me in the past couple of weeks and of course everybody loves to hear nice things about themselves. But the truth is, some of them are not true. And one of them that is definitely not true is that I am somehow fearless. And I guess what I would say to women and young entrepreneurs is that fearlessness is a myth.

Being an entrepreneur is hard. You’re putting your money on the line, you’re putting your time on the line, you’re putting your reputation, you’re potentially putting your family’s, your friends’ and your investors’ money on the line. Who would not be afraid against that backdrop? We all have times of feeling fearful, of feeling anxious, of having sleepless nights. So, what I would say is don’t aspire to be fearless. There are other aspirations that are much more useful. For example, aspire to be resilient, aspire to be persistent, aspire to be of service to other people, aspire to be very true to your values and your strategy. Don’t let this mythology of what a “leader” is supposed to look like make you feel bad about your emotions. It’s not about having those emotions, it’s what you do with them.

That’s what I would say to young entrepreneurs and especially to women. Because I do believe that women hold themselves to a very high standard a lot of the time and have a lot of misconceptions of what they’re supposed to be living up to when it comes to leadership.

Biros: What an incredible perspective to have. Okay, one last question for you: what are you doing to celebrate?

Whiteman: So far, I’ve been too busy to celebrate! This just happened so recently. I would like to take a great trip with my kids. I don’t really know I have not had time to figure that out. People tell me I need to go to Disney. But right now, it’s still taking a little while to let it all sink in. 

Biros: Wonderful! And Nancy, thank you so much for your time I really appreciate it.

Whiteman: And thank you! So nice to see you in person.

Flower-Side Chats Part 10: What’s Next for Audacious

By Aaron Green
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Flower continues to be the dominant product category in US cannabis sales. In this “Flower-Side Chats” series of articles, Aaron Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses navigate a rapidly changing landscape of regulatory, supply chain and consumer demand.

Audacious (OCTQB: AUSA) is an Aurora (TSX: ACB) spinoff formerly known as Australis Capital, Inc. They have focused on an asset-light expansion strategy whereby they leverage their expertise in designing cannabis facilities in exchange for favorable cost plus arrangements for a percentage of the facilities’ production.

We interviewed Marc Lakmaaker, SVP of Capital Markets at Audacious. Prior to joining Audacious, Marc worked with Terry Booth at Aurora. His background is in investor relations.

Aaron Green: Marc, how did you get involved in the cannabis industry?

Marc Lakmaaker: I was working for an investor relations agency. and one of my colleagues left and she had a cannabis client that I took over, which was Bedrocan, Canada. I started working with them. They were then acquired by Tweed, which became Canopy. The guy I was working with at the time at Bedrocan was Cam Battley, who then went to Aurora. As soon as he joined Aurora, he said, “I need some help.” So, I came in house and worked there until July 2019. When I left, I set up my own agency, but by that time, I’d been working with Terry Booth for a few years. Then, this past December, Terry got in touch with me and said he needed my help. It was after the concerned shareholders had won the shareholder battle around Australis and the rest is history. So, I’ve now been working with Audacious, which was Australis, since December of last year, roughly.

Green: Just quickly on Australis: So, Audacious is basically a spin off of Aurora, correct?

Lakmaaker: Correct. So, at the time, Aurora had a couple of US assets on its balance sheet, a piece of land an annuity through a company Michigan. We were listed on the TSX. We were going to list or had just listed on the NYSE and were arranging for loan facility with a syndicate of banks. They said, “even though these assets are dormant, you can’t have any US assets on your balance sheet.” So, we spun Australis off – a little bit how Canopy had spun off Canopy Rivers. But it was really the idea that Australis is going to become the foothold for Aurora in the US cannabis market because Aurora has back-in rights.

The management team was put in place and started making some investments in the cannabis space, but kind of drifted away, sort of more into FinTech. First, it was FinTech related to cannabis and then FinTech, full stop. That’s when the shareholders were like, “we don’t agree with this.” Then the proxy battle started in which the dissident shareholders, or the concerned shareholders, won overwhelmingly. The Board left. The management team left. A new management team was put in place, a new Board in place, and it was kind of a restart.

So, we feel like we’re a bit of a startup. But a very rapidly moving startup. We’ve done an incredible amount of work in just the last seven to ten months. There was a lot of housekeeping to do. A lot of stuff related to restructuring the company, dealing with the departing management teams, dealing with bringing new management, etc. There were some deals that had to be unwound… Housekeeping if you will.

Green: Australis went down the FinTech route. What are the plans for Audacious now?

Lakmaaker: We’ve already started. We pivoted right away. In early January, we announced two acquisitions. One of ALPS, and the other one of Green Therapeutics. ALPS is really what is enabling us to execute on our strategy. It’s a very different strategy. It’s an asset light model, because we figured out that in order to grow quickly in this market without spending huge amounts of shareholder money, you need to be able to get into markets in a capital-light fashion. ALPS is the world’s preeminent greenhouse design company. Not just greenhouses, but also indoor facilities. They’ve got a 35-year track record in fruits and vegetables. They’ve got an eight-year-plus track record in cannabis – and built some of the best facilities in the world. They’ve got a lot of IP.

Marc Lakmaaker, SVP of Capital Markets at Audacious (formerly Australis)

The proof point of that is our relationship with Belle Fleur. It’s a social equity license holder in Massachusetts. We helped them build their facility. We’re not contractors, but we do the design and engineering. We help them with partner selection. We do the construction management. We bring in a general contractor. Then we do the commissioning, and optionally, post-commissioning services, making sure that the facilities are dialed in. In return for all that IP, because what people know that what they get at the end of it is high quality, consistent cannabis and very low operating costs, we ask our clients to dedicate a certain percentage of their canopies to grow with our cultivars. Those we will buy back on a cost plus arrangement and we use that to launch our brands into whatever jurisdiction.

So, in Massachusetts, we’re working with Belle Fleur. We’re getting 10% of their canopy. We’re buying it back at cost plus 5%. So, we don’t have to sink money into building the facility. We’re not carrying the cost of capital there. We’re also not paying wholesale prices. And these relationships are locked in for a long time. I can’t remember if it was five or 10 years. So, it’s a very, it’s a different strategy, but it’s not contrarian – it’s very de-risked, that allows us to launch into new countries.

Then for Green Therapeutics, we’ve got a number of award-winning brands like Provisions and Tsunami. We’re kind of phasing out GT Flowers and there will be something else in its place. We also acquired Loose, which caters to a younger demographic, with a high potency shot beverage line that is now for sale in California.

We also have a partnership with PBR, the Professional Bull Riders Association. There’s some statistics around that that just absolutely blew me away – 83 million permanent fans! That’s 25% of the US population. I think the average income is $70,000. That’s well above the national average and the general split is fairly even too; it’s 53/47, male/female. Proper American sport! They have hundreds of hours of exposure on CBS. They’ve got 2 billion imprints on social media. So, with PBR, we launched Wreck Relief, which has several recognized and approved pain products in the lineup.

Green: What markets are you in right now?

Lakmaaker: Right now we’re in Nevada with cannabis products. This is our home market where our head offices are in Las Vegas. We’re in California. We just bought a dispensary in San Jose that comes with a partnership with Eaze. On top of that, we’re operationalizing in Missouri and Oklahoma, and officially building in Massachusetts.

Then through ALPS because they does both cannabis and non-cannabis, we’re in a number of states. We’re looking to get more of the supply deals. We’re also doing a lot of vegetable facilities throughout the entire world. We’re in Europe, we’re in Asia, in the Middle and in North America, we build these facilities from the desert up to the Arctic.

There’s a big movement right now to produce food that is safe and has a smaller carbon footprint. So, our facilities are kind of inherently more sustainable. They use up to 95% less water, less labor, less energy, they are less prone to disease, crop failure, everything. And because you are local producing for local communities, you reduce the transport carbon footprint.

Green: What in your personal life or in cannabis are you most interested in learning about?

Lakmaaker: I really like the sciences. I’m a chemical engineer by training. I think what is going to take an incredible flight in the years to come is the application of medical scientific research that’s being done right now. To me, that’s fascinating because the cannabis plant is something special. It’s got such a broad utility that we know, anecdotally. I think we’re moving towards a world where we’re going to see a lot of breakthroughs on the medical side.

I’m very excited about the other end too – cultivation. I think tissue culture is going to play an incredible and important role.

Green: Thanks Marc, that concludes the interview.

Lakmaaker: Cheers, Aaron.

Cannabis Recalls: Lessons Learned After Three Years of Canadian Legalization

By Steven Burton
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Three years ago, Canada became one of the first countries in the world to legalize and regulate cannabis. We’ve covered various aspects of cannabis regulation since, but now with a few years of data readily available, it’s time to step back and assess: what can we learn from three years of cannabis recalls in the world’s largest legal market?

Labelling Errors are the Leading Cause of Canadian Cannabis Recalls

Our analysis of Health Canada’s data revealed a clear leader: most cannabis recalls since legalization in October 2018 have been due to labelling and packaging errors. In fact, over three quarters of total cannabis recalls were issued for this reason, covering more than 140,000 units of recalled product.

The most common source of labelling and packaging recalls in the cannabis industry (more than half) is inaccurate cannabinoid information. Peace Naturals Project’s recall of Spinach Blue Dream dried cannabis pre-rolls this year is a good example. Not only did the packaging incorrectly read that the product contained CBD, but the THC quantity listed was lower than the actual amount of THC in the product. The recall covered over 13,000 units from a single lot sold over 10 weeks.

In another example, a minor error made a huge impact. British Columbia-based We Grow BC Ltd. experienced this firsthand when it misplaced the decimal points in its cannabinoid content. The recalled products displayed the total THC and CBD values as 20.50 mg/g and 0.06 mg/g, respectively, when the products contained 205.0 mg/g and 0.6 mg/g.

Accurate potency details are not just crucial for compliance. For many customers, potency is a deciding factor when selecting a cannabis product, and this is especially important for medicinal users (including children), people who are sensitive to certain cannabinoids and consumers looking for non-psychoactive effects. In this case, at least six consumer complaints were submitted to Peace Naturals Project, the highest number for any cannabis recall in Canada.

Frequent, integrated lab testing, an effective and robust traceability system, smaller lot sizes during production and consistent quality checks could have helped Peace Naturals Project and We Grow BC limit the scope of their recall or avoid them altogether.

Pathogens are the #2 Cause of Cannabis Recalls in Canada

Pathogens are the second most common cause of recalls in Canada, claiming 18% of total cannabis recall incidents. And while that doesn’t sound like much compared to the recalls caused by labelling errors, it affects the highest volume of product recalled with over 360,000 units affected.

Canadian Cannabis Recalls – Total number of affected units and noted causes

A primary cause of allergens and microbiological contamination of cannabis products is yeast, mold and bacteria found on cannabis flower (chemical contaminants like pesticides can also be a major concern). Companies like Atlas Growers, Natural MedCo and Agro-Greens Natural Products have all learned this lesson through costly recalls.

These allergenic contaminants pose an obvious health risk, often leading to reactions such as wheezing, sneezing and itchy eyes. For people using cannabis for medical conditions and may be more susceptible to illness, pathogens can cause more serious health complications. Moreover, this type of cannabis recall not only drives significant cost since microbiological contamination of flower could easily affect several product batches processed in the same facility and/or trigger downstream recalls, but also affect consumer confidence for established cannabis brands.

Preventive control plan requirements for cannabis manufacturers mandate that holders of a license for processing that produce edible cannabis or cannabis extracts in Canada must identify and analyze the biological, chemical and physical hazards that present a risk of contamination to the cannabis or anything that would be used as an ingredient in the production of the edible cannabis or cannabis extract. Biological hazards can come from a number of sources, including:

  • Incoming ingredients, including raw materials
  • Cross-contamination in the processing or storage environment
  • Employees
  • Cannabis extract, edible cannabis and ingredient contact surfaces
  • Air
  • Water
  • Insects and rodents

To mitigate risks, addressing root causes with preventative measures and controls is essential. For instance, high humidity levels and honeydew secreted by insects are common causes of mold on cannabis flowers. Measures such as leaving a reasonable distance between plants, using climate-controlled areas to dry flowers, applying antifungal agents and conducting regular tests are necessary to combat such incidents.

control the room environment
Preventative measures and controls can save a business from extremely costly recalls.

Of course, placing all the necessary controls into action is not as simple as it may sound. Multiple facilities and a wide range of products in production mean more complexity for cannabis producers and processors. Any gaps in processing flower, extracts or edibles can result in an uncontrolled safety hazard that may lead to a costly cannabis recall.

These challenges are not just limited to cannabis growers. The food industry has been effectively mitigating the risk of biological hazards for decades with the help of food ERP solutions.

Avoid Recalls Altogether with Advanced ERP Technology

An effective preventative control plan with regular quality checks, internal audits and standardized testing is important to minimize the threats evident from Canada’s recall data. If these measures ever fail, real-time traceability systems play a pivotal role in the event of a cannabis recall by enabling manufacturers to trace back incidents to the exact point of contamination and identify affected products with surgical precision.

Instead of starting from zero, savvy cannabis industry leaders turn to the proven solutions from the food industry and take advantage of data-driven, automated systems that deliver the reliability and safety that the growing industry needs. From automated label generation to integrated lab testing to quality checks to precision traceability and advanced reporting, production and quality control systems are keys to success for the years ahead.

Cannabis Safety & Quality: An Interview with the Founder of CSQ

By Aaron Green
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The supply chain for consumer cannabis products is complex, involving cultivation, extraction, manufacturing and packaging. While global best practices exist for Good Agricultural Practices (GAPs) and Good Manufacturing Practices (GMPs), the certifications are not tailored to the cannabis industry.

CSQ has developed tailored standards for the cannabis industry to assist cannabis companies in improving their quality. As a division of ASI, a woman-owned business that’s provided safety solutions to the food industry since the 1940s, the CSQ standards were built in 2020 to meet ISO requirements, GFSI requirements and regulatory cannabis requirements from seed-to-sale. CSQ is the first cannabis certification program to meet the GFSI Benchmarking Requirements with plans to be benchmarked in 2022.

We interviewed Tyler Williams, CTO and founder of CSQ. Tyler founded CSQ after working at ASI – a family-owned food safety company in St. Louis.

Aaron Green: Nice to meet you, Tyler. How did you get involved in the cannabis industry?

Tyler Williams: It’s kind of a long story, but it’s a good story. My mom worked for ASI for 15+ years. That company has been around since the 1940s and is one of the oldest food safety companies in the world. The owners were ready to sell about five or six years ago, and my mom ended up using a small business loan to purchase the company. That’s how I got started in a food safety and dietary supplement space.

About three to four years ago, we started getting inquiries from cannabis companies asking about GMP audits and certification and different things. We started doing certifications to our GMP food processing standard or dietary supplements depending on what they wanted but realized that there were a lot of things that weren’t applicable to cannabis companies or there were extra things needed for cannabis companies. That’s how I started working with cannabis companies to start developing the CSQ certification program and it has just kind of grown over the years.

Tyler Williams, CTO and founder of CSQ

We currently have four standards at the CSQ level. CSQ plans on being benchmarked to GFSI which stands for Global Food Safety Initiative. We plan on going through that process to get the benchmark next year. There are four standards underneath CSQ: one for growing and cultivation; one for extraction; one for food and beverage edibles; and then cannabis dietary supplements. We’re looking to add standards for cosmetics, cannabis contact packaging materials, retail and consumption lounges.

Last year, when we were doing our pilot audits, we realized that the CSQ standard was great for medium to big sizedMSOs because they’re already doing these best practices. It’s easier for them to, you know, implement a few things, and then get certified, whereas for the smaller guys who might be coming from the illicit market, it’s a lot harder – it’s a lot bigger jump from them to go from zero to 100. Last month, we released our unaccredited cGMP, cGMP+, cGAP and cGAP+ standards. The difference between the regular and the plus is that the plus has HACCP (Hazard Analysis Critical Control Point) and then it also includes a recall module where the site must do a mock recall while the auditor is on-site.

CSQ doesn’t perform the audits. We license the use of our standard to accredited certification bodies and then they must get accredited to be able to certify companies under the CSQ name.

Green: Can you tell me a bit about the genesis of CSQ and the structure of the organization?

Williams: We’re a for-profit company. We thought about going the non-profit route but it’s a lot more intricate and a lot more people involved when you go that route. Our parent company is ASI, and we are under the ASI global standards division which is responsible for developing standards. So, CSQ is one of those standards under that brand and that’s kind of the foundation of it. We have two licensed certification bodies right now. ASI has a certification body, and they are one of our licensed CBs and then WQS, who’s based out of North Carolina and has a big presence in South America which is great because we’re starting to get inquiries from companies in South America as well.

Green: How do you go about building industry awareness and acceptance of the standard?

Williams: Building awareness really started with going out to the medium- to large-sized companies and saying, “Will you open your doors and let us come and basically do all these audits for free at your facility just so we can kind of get a baseline across the industry?” So, that started the conversation with industry. The MSOs in the medium- to large-sized companies, are more ready to go through the certification process because they know that federal legalization is around the corner. They know these things are going to have to be in place already so they’re just doing it as preparation. There isn’t much demand for retailers right now like there is in the food and or dietary supplement space. So that’s where the demand is really coming from – wanting to self-regulate in preparation for federal legalization.

Most of our outreach is education-based. We speak at a lot of conferences. We host a lot of webinars and free events and things like that, just to get the word out about CSQ. A lot of people know what GMPs are, or know that they should be following GMPs, but they don’t necessarily know how to get from point A to point B. Our job is to educate them that it’s not as hard as they think it is and it’s not as expensive as they think it is. The cost of an audit is relatively inexpensive. What I always tell people is the sooner you start preparing, the cheaper the whole process is. What happens a lot of times is a facility will not build out their facility to GMP specifications, and then they want to get GMP certified so they must move the hand washing station from the back of their facility to the front where the employee entrance is or things like that. The sooner these companies start thinking about it, the better and that’s basically what we’re trying to do is just educate the industry about that kind of preparation.

Green: cGMP and cGAP are perhaps more broadly accepted outside of the cannabis industry. Do cGMP and cGAP fall under the CSQ certification?

Williams: There are four ingredients that make up the CSQ standard. There are industry best practices, which are specific to just the cannabis industry. There are good manufacturing practices, or good agricultural practices, that are just accepted globally. Then we look at the Codex Alimentarius, which is the global food code. Every country mustwrite their federal rules on food based off this standard. We use the Codex when we’re talking about edibles and things like that. And then the last aspect of CSQ is the GFSI benchmarking requirements. So that’s kind of the basis of our program, making sure that the auditors have certain amount of audit hours, and we have training and processes in place for that. That’s where the GFSI benchmarks are coming out. So, all those four things kind of really create the CSQ standard.

Green: There are clear internal benefits to a company for holding to a quality standard. What are the downstream benefits to the companies that have CSQ? How do the end-users know about it?

Williams: I come from the food industry and if you go to the grocery store, you just assume that everything’s safe.Consumers don’t even think about the certifications that those companies must get to even be able to sell their product in retail stores. They don’t necessarily put those certifications on the packaging material, because as a consumer “SQF” means nothing to most consumers, right? It would only mean something if you’re in the industry.We’re trying to be different with CSQ and get more consumers aware of it. One of the things that we have is a database of certified facilities. Consumers will be able to say, “Okay, maybe I’m interested in this new brand. Are they certified to this program or not?” and be able to see that. We’re also trying to get companies to put the CSQ logo once they’re certified on their marketing materials.

Now, one thing that we cannot do yet is put the logo on the finished product packaging, because we don’t have a testing addendum, but we’re working on that. There’s not a lot of demand for it right now and it’s more expensive audit costs, where you’re talking about lab tests, and things like that. So, it’s something that we’re working on, but we haven’t fully developed yet.

Green: Next question is around d-8 THC and federal regulations. What’s your position on d-8 and how are you thinking about d-8 trends in the future?

Williams: d-8 THC itself as a product, I think it’s fine. I think if it’s made safely, we know all the components I think it’s fine from that aspect. The problem that we have right now is it’s not regulated. That’s where I think we need to have these states that have legalized THC or hemp to then implement rules and regulations and bring d-8 THC into those rules and regulations. And so maybe then it’s only those licensed facilities that are inspected by the state that are producing those products and not just some guy out of his garage. I think a lot of people right now are just wanting to ban it completely and I don’t think that’s the best approach. There’s nothing wrong with the product itself, it’s just how it’s being produced right now in the gray area where no one’s regulated.

Green: What in your personal life or in cannabis are you most interested in learning about?

Williams: I love what I do. I’m always looking at and reading regulations and then trying to learn something new. I’ve been going through organic certification training right now. At some point, CSQ will probably go down the route of having some sort of organic certification. So that’s been kind of what I’ve been working on and learning right now. But I’m a sponge and I like to absorb new information about the industry.

Green: Thanks Tyler, that concludes the interview!

Williams: Thanks, Aaron!

Registering Trademarks in the Cannabis Space

By Mike R. Turner, Joseph Sherling
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As the legality and availability of hemp and non-hemp cannabis products continues to grow, having strong, recognizable brands will become increasingly important in order to stand out from the competition. Unfortunately, strong brands invite knock-offs and can require aggressive policing. Registering your trademarks makes policing much easier, but registration of marks used to sell hemp and non-hemp cannabis products requires strategy and forethought.

Why Register?

Trademark rights flow from use, so a registration is not required for enforcement. However, “common law” rights based on use alone must be proven in each instance, and you must show that your use of the mark has been sufficient such that consumers recognize and associate it with your goods or services. This can be difficult, expensive and time consuming. Also, common law rights are territorially limited. Even if you can prove such rights in Oregon (for example), you may have no right to prevent use of your mark in other states. State trademark registrations are similarly limited, but are presently all that is available for marks used exclusively to sell non-hemp cannabis products.

By contrast, a federal trademark registration provides the registrant a nationwide, exclusive and presumed right to use the mark in association with the designated goods and services. In addition, counterfeit use of a federally registered trademark can lead to statutory damages. That is, you don’t have to prove an amount of harm—a court may simply award damages based on statute. Yet another benefit is the ability to file based on an “intent to use.” You can thereby reserve a mark nationwide for up to three years before you must show use. Federal registration is available for marks used to sell hemp products, but with some strict limitations as discussed below.

Use in Commerce Requirement

Federal registrations are issued by the United States Patent and Trademark Office (the Office) once an application is approved and use in commerce is demonstrated. To satisfy the “use in commerce” requirement, an applicant must show that a mark is being used in association with the sale of goods or services that are legal to trade under federal law. Sale of products not legal under federal law simply does not count to establish trademark use for purposes of federal registration. This is where the vast majority of federal trademark applications for use with cannabis products get rejected. A search of the federal registry shows that, of over 8000 trademark applications for products containing cannabis extracts, only about 1,300 have resulted in registrations. But these 1,300 illustrate that there is a path to success.

Allowable Goods

The Office traditionally rejected all applications for use with products containing any cannabis extracts under the Controlled Substances Act (CSA). The Agricultural Improvement Act of 2018, commonly known as the Farm Bill, created an exception to the CSA for hemp, defined therein as cannabis extracts containing < 0.3% THC by dry weight. Based on this, the Office began allowing applications provided they designate only goods having 0.3% THC content or less. But even that limitation isn’t sufficient for some types of goods.

FDAlogoUnless specifically disclaimed, the Office will assume the presence of CBD in products containing cannabis extracts, regardless of THC quantity. On that basis it will reject applications for hemp products that are ingestible (food, drinks, nutritional supplements, etc.), or that claim a medical or therapeutic purpose, under the Food, Drug & Cosmetic Act (FDCA). The FDCA requires Federal Drug Administration (FDA) endorsement to add “drugs” to such products, the FDA classifies CBD as a “drug,” and the FDA has authorized only a few products that include CBD. Thus, an allowable good that is ingestible or therapeutic must not only contain the low THC disclaimer, but must also state an absence of CBD. Notably, the Office has not been rejecting products on the basis that they contain CBG (cannabigerol) or other naturally occurring non-THC, non-drug cannabinoids.

Are the Goods Sold Really Allowable?

Of course this scheme of word-smithing designations to obtain allowance of federal trademark registrations invites error, if not fraud. Registrations are subject to cancellation if use of the mark with the designated goods is not maintained, or if it can be shown that the registration was fraudulently obtained. Thus, critical to a claim of use is that the applicant offers products that actually meet the designation description. The Office does not check for THC levels or CBD presence, and most purveyors of hemp products don’t either. Indeed, there is not even a standardized method for measuring these things. However, studies show that more than half of hemp products either purposefully or accidentally misrepresent their actual THC and CBD levels.i Though legally untested, this presents a potential problem for many existing federal registrations.

If a mark registered for use with goods having < 0.3% THC is found to be used only with products that actually have a greater amount of THC in them, the registration could be canceled. The same fate could befall a registration for goods claiming to have no CBD that, when tested, actually do contain more than trace levels. Even if non-hemp cannabis products are legalized under federal level, registrations obtained with THC and/or CBD limitations would still require the registrant to use the mark with products meeting such limitations.

Keeping Evidence for Insurance

So long as a registrant has maintained use of the registered mark “in commerce” in association with the designated goods, the registration is insulated from attack based on claims of non-use or fraud. The fact that the registrant also uses the mark for goods that are not legal on the federal level is of no consequence to the registration. Thus, it is wise to include in the product lineup under the brand to be protected at least some good that meets the present requirements for federal trademark registration.

One option is to include a product where the only cannabis extract is from hemp seed oil. Without even testing it, you can be reasonably assured that such a product will contain little or no CBD or THC. Another option short of testing is to obtain a certification or warrant from your supplier that particular ingredients truly are hemp, i.e., have < 0.3% THC by dry weight. This could be relied on as evidence should no original product be available for testing to show that use was legitimate at the time registration was obtained. If you can’t obtain such a certification, testing the occasional sample and keeping records over time would also work. Product samples can now be tested for THC content for around $100 per sample, with results back in about a week.ii

Zone of Natural Expansion

Though non-hemp cannabis products cannot be covered directly by federal registrations, a federal registration for CBD/hemp products can have spillover benefits. This is because the scope of a registration may expand to cover things similar to what is designated. The question comes down to likelihood of confusion. Imagine a company holds a registration covering LOOVELA for “nutritional supplements containing hemp seed oil having no CBD and < 0.3% THC by dry weight.” It would be logical for a consumer to assume that non-hemp cannabis products sold under the LOOVELA mark would likely be made by the same company. Thus, provided the company actually sold products complying with its designation, it could assert the CBD-based registration to prevent sale of LOOVELA branded non-hemp cannabis products. Also, should such products be legalized federally, the company would likely be the only applicant able to obtain an additional federal registration for LOOVELA for use with them, because any competing attempt would be confused with their pre-existing registration for CBD/hemp products.

In conclusion, it should be noted that the law in this space is evolving rapidly and is nuanced. Every situation is unique in some way, and there are many reasons an application may fail or a registration may be attacked that are not addressed above. But there is value in obtaining a federal registration for your hemp brands, and there is an overall strategy to be employed for brand protection in the cannabis space.

The content above is based on information current at the time of its publication and may not reflect the most recent developments or guidance. Neal Gerber Eisenberg LLP provides this content for general informational purposes only. It does not constitute legal advice, and does not create an attorney-client relationship. You should seek advice from professional advisers with respect to your particular circumstances.

References

  1. See, e.g., Bonn-Miller, Marcel O., et al., “Labeling Accuracy of Cannabidiol Extracts Sold Online,” Journal of the American Medical Association, Vol. 318, No. 17, pp. 1708-09 (Nov. 7, 2017); Freedman, Daniel A. and Dr. Anup Patel, “Inadequate Regulation Contributes to Mislabeled Online Cannabidiol Products,” Pediatric Neurology Briefs, Vol. 32 at 3 (2018).
  2. See, e.g., www.botanacor.com/potency/

Protect Your Business: Comprehensive Rodent Exclusion

By David Colbert
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Many experts agree that of all pests threatening the cannabis industry, rodents are the most dangerous. Not only do they chew on cannabis plants and ruin crops at an incredible rate, they also contaminate product with their urine and feces. Rodents post a serious threat to cannabis facilities at every level of the supply chain.

Rodents’ incisor teeth never stop growing; left untouched, a rat’s incisor teeth would grow 4 inches in a year*. For this reason, they must constantly gnaw on things around them to wear them down. Unfortunately for cannabis growers, the woody stalks of cannabis plants present a perfect target. The destructive power of rodents cannot be overstated – creatures that can gnaw through plastic, wood, aluminum, brick, cement and even lead will make very short work of cannabis crops.

The notion that growing cannabis indoors will protect it from rodents is a misconception. Their destructive gnawing power makes rodents highly adept at getting inside buildings. Rodents can enter a building through an opening as small as 1/4 inch, and they will use any means necessary to reach the food and shelter that a heated building provides. In addition to squeezing through minuscule openings, rats and mice can climb wires and rough surfaces, jump considerable distances and tread water for several days.

Rodents, easily squeezing through small openings in a facility, will find food and shelter that a heated building provides

And once they are inside, it is already too late. Pest control experts worldwide agree that exclusion – the technical term for using physical barriers to prevent rodents from entering a building vs. trying to remove them once inside – is the safest, most effective approach to rodent control. This is because once rodents have gained entry, they will contaminate – and multiply – at an alarming rate.

In one year, two mice could potentially multiply into more than 5,000 mice and two rats could become 1,250. In that same year, a single rat can shed more than half a million body hairs, and a mouse can produce up to 18,000 fecal droppings. Rodents eat or contaminate at least twenty percent of the world’s food supply each year (according to the Indiana Department of Health) and carry diseases including rat bite fever, hantavirus, leptospirosis, salmonellosis, murine typhus, and even the bubonic plague. According to experts from Total Food Service, “Mice are known to frequently carry salmonella bacteria in their digestive tract, so salmonella can be easily spread through contact with rodent waste. This is true with marijuana [sic]edibles just as it is with other food products.”

Keeping rodents out of cannabis facilities is fundamental to protecting crops and products. The most common rodent entryways include exterior doors, open garage and loading dock doors, windows, air vents, fireplaces and at points where electrical, water, gas, sewer and HVAC lines enter the building. Rats and mice can also gain entry through tiny cracks in the foundation, by gnawing through the standard rubber and vinyl seals on most garage and loading dock doors, and beneath roofing tiles.

Consider the following exclusion best practices highlighted in The Mallis Handbook of Pest Control:

  • Safeguard your doors. Wooden doors are continuously vulnerable to the gnawing of rats. Sheet iron flashing should be installed surrounding the door, and any clearance below the door must be smaller than 3/8 inch. All doors should remain closed when not in use and be fitted with proven, specialized rodent-proof door sweeps.
  • Ventilator grills and windows should be protected with proper and proven exclusion materials, ensuring any voids or cracks are filled.
  • Defective drain pipes provide a transportation pipeline for rodents. A perforated metal cover should be cemented over the drain pipe, and any small openings surrounding the drain where it enters the building should be patched or filled with proven exclusion material.
  • Large sidewalk cracks should be sealed as these crevices allow rodents to access a building’s foundation, enabling them to more easily search for entry points. Foundation walls can be protected with barriers of metal, concrete, or brick around and below the foundation.
  • Circular rat guards should be placed around all vertical wires and pipes.
  • Ensure that cracked or broken roofing tiles are identified and replaced in a timely manner, and utilize proven exclusion material to fill any voids.

It’s also critical that only proven, rodent-proof exclusion materials be utilized to seal entry points. Caulk, mortar and spray foam offer almost zero protection against the gnawing power of rodents. Steel wool is often used for filling cracks and crevices, but will eventually rust and break down, rendering it useless against rodents. All exclusion materials should be made of stainless steel or other permanent elements.

Rodents are not easily deterred, but a well planned exclusion program can save you from costly infestations

Standard rubber door sweeps used for weatherization are not designed to withstand rodent gnawing, making the small gap beneath and around exterior doors a primary rodent entry point. Specialized rodent-proof door sweeps are fundamental to effective rodent exclusion. Xcluder’s Rodent-Proof Door Sweeps feature a core of Xcluder Fill Fabric – a blend of stainless steel and poly-fiber with sharp, coarse fibers that rodents cannot gnaw through – reinforced gaskets for a superior weatherseal and an extended rubber flap to create a flush ground seal against insects and other outdoor contaminants. Installing rodent-proof door sweeps is arguably the single most important step in protecting cannabis facilities from rodent infestation.

Sanitation is also important. Food products of any kind must be stored in sealed containers. Garbage should be collected frequently and stored as far away from the building as possible. Clutter should be avoided in storage areas as crowded shelves and boxes create opportunities for rodent nesting. Roofs and gutters should be free of debris as standing water attracts rodents as well. All trees and landscaping should be trimmed back away from the building to prevent not only rodent burrowing but also access to the roof.

Rodents are not easily deterred, but a well-supported, thorough exclusion plan is the strongest weapon in the fight against rodents. Investing the time and resources to properly safeguard buildings against rodents before a problem is identified is the best way to protect the plants, products and personnel inside cannabis facilities.