According to a press release published last week, Medicinal Genomics has hired Sherman Hom, Ph.D. to be their first director of regulatory affairs. Dr. Hom is coming from a position at New Jersey’s Division of Public Health and Environmental Laboratories (PHEL) where he was the leading research scientist for the state’s cannabis testing lab as well as coordinating their pre-analytical activities for SARS-CoV-2 testing.
As project manager for the state’s cannabis testing lab, he was responsible for validating microbial testing in cannabis. He has also been a professor of microbiology, a lab manager, a senior research scientist, a writer and an inventor, according to the press release.
“My passion is regulatory affairs,” says Dr. Hom. “For the last 4 years, we’ve been building a facts and comparison database of required state medical cannabis testing. It’s formidable. Of course, the states will all have the same regulations eventually. In the meantime, it’s my job to help them craft the safest, most efficient and effective set of regulations possible. I’m here because I know Medicinal Genomics shares that passion.”
Delta 8 THC (delta-8-tetrahydrocannabinol) sprung onto the scene late last year in a big way. While similar to the much more widely-known delta-9-tetrahydrocannabinol that produces a lot of the psychoactive effects associated with ingesting cannabis, delta 8 THC can be derived from hemp with less than 0.3% delta 9 THC. Given the legality of hemp-derived products following the 2018 Farm Bill, delta 8 THC can be produced in some states where delta 9 THC still remains illegal.
While delta 8 is considerably different in its psychoactive effects from its cousin, it does overlap in some ways. It can still produce some more manageable, less “heady” versions of delta 9’s effects like euphoria and relief found in the many medical applications of cannabis. DeltaVera, a company that launched less than six months ago, aims to share that more manageable THC experience with the masses.
The sharp rise of the delta 8 market means that DeltaVera is poised for growth. With distribution contracts inked, exciting partnerships in the works and a large surge in consumer demand, the founders of DeltaVera are at the ready to capitalize on this lesser-known molecule and bring it to the forefront of the nascent hemp industry. Starting out as a small family business, Sam and Craig Andrus launched DeltaVera with their third founder, PK Isacs.
We sat down with Sam Andrus and PK Isacs, two of the founders of DeltaVera, an award-winning brand, to ask them about their plans for expanding, how they became entrepreneurs and why they think delta 8 is the next big thing in cannabis.
Cannabis Industry Journal: Tell me about your company. How did you get started in the cannabis space?
Sam Andrus: I had an early start in the Delta 8 THC industry on the sales side. We knew we wanted to get into the market, but observed a number of aspects in the space that needed to be addressed: the most important being quality control, transparency and brand trust. With this as a backdrop we launched DeltaVera. Highly curated, approachable, transparent and value-oriented with a strong focus on reliability and trust. The DeltaVera family is made up of three operating managers and the sales team. We are three founders with complementary skill sets: Craig, who has domain expertise in finance, governance and startups, PK who has experience in business and marketing and my sales experience round out the management team.
We have yet to solicit outside capital and have funded ourselves internally as we create our brand and refine our product offering. That said, we are seeing numerous opportunities in strategic partnerships and expansion, which will require additional capital. And we are excited to start this expansion process.
CIJ: What makes the Delta 8 space so remarkable? Why are your SKUs primarily formulated with Delta 8?
Sam Andrus & PK Isacs: Delta 8 THC is an alternative/complement to delta 9 THC, CBD and other cannabinoids. Its status as non-federally scheduled and its less potent psychoactive effects make it appealing in its own right. Delta 8 THC can help with healthier sleep patterns and with pain management in a way that CBD can’t, without a strong “head high” that many of our customers like to avoid. Additionally, it’s shorter lived and doesn’t give you any negative residual effects, which makes it beneficial for people on tighter schedules. These factors make it easier for us to approach markets that are inaccessible to both delta 9 THC and CBD, such as older demographics. In a world where delta 9 is legal, there will still be a place for delta 8.
While we are very proud of our suite of smokable products, we are currently focusing our efforts on edibles: our Delta Discs are our mainstay, though we are expanding our product line to include nano-emulsion products such as liquid shots and nano gummies. They strongly appeal to our target demographics; additionally, the edible market is growing very quickly in states that allow the sale of hemp-derived consumables.
CIJ: Continuing on the delta 8 front – right now it is considered a cannabinoid legal for interstate commerce, much like CBD, correct? Do you think that will change?
Sam & PK: That is currently the case. Delta 8 THC is newer, and as such, it has even more ambiguity in regards to its legal future. But what’s most exciting (and our most challenging task right now), is informing consumers about the benefits of delta 8. We are one of a few companies solely focused on the consumption of delta 8, because of its similar benefits to delta 9 and CBD – our products are the perfect happy medium: a high with less psychoactive effects and all the health benefits of both, making it a desirable alternative to all consumers.
In addition, we are looking at some combinations of delta 8/CBDA, delta 8/CBN, delta 8/THCV and are very excited to begin test marketing these combinations. These proprietary blends of minor/major cannabinoids can cater to a niche target demographic as they can be curated to have very specific and unique effects when combined in the right quantities with the right delivery system. They will also be able to serve a larger customer base as these cannabinoids can all be derived from hemp.
CIJ: How do you think the FDA would regulate your product? Do you welcome federal oversight?
Sam & PK: Regardless of whether or not we are regulated we are committed to a high level of transparency and trust. As noted in unregulated markets, like the supplement market, you don’t always know what you are getting in terms of purity and potency. We are changing that paradigm by adding unique QR codes to our sustainable containers which reference COAs [certificates of analyses] specific to the contents of the case. A lot of the space is naturally trying to avoid that kind of regulatory interference, but we are currently doing our best to self-regulate and make sure that our consumers are fully informed about what they’re receiving.
We will be the first to say that there aren’t as many laws governing delta 8 THC as there could be, and that’s why we’ve spent so much time and money on self-regulation. All of our products have very clear nutritional information in addition to test results down to one hundredth of one percent. As for what category these products should fall under: we have a wide range of products, and each one has its place under a different umbrella of regulation. We hope that the federal government will take advantage of the vast array of studies that have been conducted on delta 8 THC since it was first extracted in 1942 to step up to this product that is, in our experience, helping so many people.
CIJ: Tell me about how your business has grown so far.
Sam & PK: When we sell to a retailer, we try to provide them with as much material as possible on what delta 8 THC is and what differentiates DeltaVera’s products. Still, we’ve had some difficulty in places with limited delta 8 THC exposure. That being said, when someone tries our product, there is a high likelihood that they become a repeat customer (and they tell their friends). Given our newness to the market (Our brand launched in January 2021) initial indications are – we have a good rate of repeat orders, and we’ve heard the same from our brick-and-mortar partners.
Our distribution network has grown tremendously; we’ve taken a three-pronged approach to distribution: partnerships with like-minded companies in compatible spaces, an e-commerce market on our website, and a commission-based sales structure to reach brick-and-mortar establishments. To date, most of our distribution takes place in the latter two spaces, due to the added time and commitment involved in forming partnerships. As a company we are taking a more creative approach on how we present our product and alternative ways to consume it. We have some exciting collaborations in the works; follow us on social media to stay up to date with everything on the horizon. We are very enthusiastic about our partnerships however, with our first collaboration with WaxNax, a Denver-based company revolutionizing the cannabis dabbing experience, hitting the shelves this week.
CIJ: What is your marketing plan?
Sam & PK: We are working on building a social media presence. Natalie, who is leading the charge on social media, recommended we take an organic approach to build our base. We want to avoid falling into the “paid ad”, “spam” vibe as long as we can. We are currently focused on building a community through delta 8. Our mission is making DeltaVera a brand for all lifestyles, athletes, creatives, travelers or business professionals. We’re confident in our product, and have faith that it can speak for itself.
CIJ: How do you ensure quality in your products?
Sam & PK: Our products are of guaranteed quality with our licensed growers and manufacturers. We provide COAs, informing the retailer & consumer about each product, displaying full panel tests on cannabinoids and heavy metals. These preliminary and secondary lab tests ensure our product is below 0.3% delta 9 THC in all our products. Through third-party labs, we run full panel tests which pick up a variety of cannabinoids; for most of our products we focus on the level/purity of delta 8. Our products are screened for both contaminants and heavy metals.
All this information is housed conveniently on our website that can be reached through our QR codes.
CIJ: What are your plans to grow the business in the future?
Sam & PK: We feel very confident in our three methods of distribution: partnerships, e-commerce and a commission-based sales structure. We’ve made tremendous ground on partnerships, and are very excited about numerous partnerships we have in the pipeline. We’ve reached out to some incredible groups in the CBD space, the THC space and a few groups that you wouldn’t normally associate with cannabinoids, but with whom we’ve workshopped some really creative ideas that we’re really looking forward to bringing to market.
Readers can use promo code “CIJ” to get 15% off their first order here.
In Part 1 of this series we answered the question: What is “hemp”; and addressed some of the consequences of defining “hemp” as a thing. In Part 2, I will explore this topic in more detail and provide some commonsense definitions for several traditional hemp products based on a classification approach rather than separating “cannabis” from “hemp”.
Classifications, Specifications, and Test Methods – Establishing Market Protections for Hemp Products Through Standardization
Does making a distinction between “hemp” and “cannabis” make it easier to protect the interests of the seed and fiber markets?
On the face of it, this question seems obvious. Yes, it does.
Up to this point in history, the bifurcation of the cannabis plant into resin types and non-resin types has served to provide protections for the seed and fiber markets by making it easier for producers to operate, since the resins (the scary cannabinoids, namely d9-THC) were not involved. Today, however, the line in the sand, has been washed away, and “hemp” no longer only refers to non-resin producing varieties of the cannabis plant.
As more and more hemp marketplaces come online with varying limits for d9-THC the need for standardization becomes even more pressing. Without standardization, each marketplace will have its own requirements, forcing businesses looking to sell their products in multiple jurisdictions to comply with each region’s mandates and adds a significant level of burden to their operations.
Providing an internationally harmonized definition for hemp is an important first step but allowing the d9-THC limit to vary from jurisdiction to jurisdiction has some unintended (or intended) consequences (#NewReeferMadness). These discrepancies between legal marketplaces will inevitably lead to the establishment of global trade regions; where, if your product cannot meet the definition of “hemp” in that region, then you could effectively be barred from participating in it.
A process which has already started. Harmonizing around 0.3% is great for the US, Canada, and European Union, but what about other stakeholders outside of these markets?
And, at what point does the conflict of hemp from one region with a d9-THC content of 0.3% and hemp from another region with a d9-THC content of 1% being sold into the same market become a problem?
Perhaps a better long-term solution for protecting the market interests of “hemp product” stakeholders would be to establish specifications, such as identity metrics, total cannabinoid content, especially d9-THC, and other quality attributes which have to be verified using test methods for a product to be classified as “hemp”. This system of standards (classifications, specifications, and test methods) would allow for more innovation and make it significantly easier for cannabis raw materials that meet these specifications to find a use rather than being sent to the landfill. Bolstering advancements and opening the door for more market acceptance of the cannabis plant, its parts, and products.
An Alternative Approach to Defining Hemp
Below are some proposed definitions related to common terminology used in the hemp marketplace based on the concept that there are no hemp plants, there are only cannabis plants that can be classified as hemp, and hemp products are simply cannabis products that meet certain specifications to allow them to be classified and represented as hemp.
Hemp, n—commercial name given to a cannabis plant, its parts, and products derived therefrom with a total d9-THC content no more than the maximum allowable limit for the item in question. (Maybe not the best definition, but it makes it clear that not only does the limit for d9-THC vary from jurisdiction to jurisdiction it varies from product type to product type as well.)
Hemp flower, n—commercial name for the inflorescence of a cannabis plant that can be classified as hemp.
Hemp seed, n—commercial name for the seeds of a cannabis plant which are intended to be used to grow another cannabis plant that can be classified as hemp.
Hempseed, n—commercial name for the seeds of a cannabis plant which are intended to be used as food or as an ingredient in food.
Hemp seed oil, n—commercial name for the oils expressed from the seeds of a cannabis plant.
Hemp seed cake, n—commercial name for the solid material byproduct generated during the expression of the oil from the seeds of a cannabis plant.
Hemp flour/meal/dietary-fiber, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content no more than 35% by weight.
Hemp protein powder, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content between 35% and 80% by weight.
Hemp protein isolate, n—commercial name for the powdered seed cake of a cannabis plant intended to be used as a food or as an ingredient in food with a protein content above 80% by weight.
Hemp fiber, n—commercial name for the cellulosic-based natural fibers of a cannabis plant.
Hemp shives, n—commercial name for the hurd of a cannabis plant which have been processed to defined specifications.
Hempcrete, n—commercial name for a solid amalgamation of various aggregates and binders, typically comprised of the hurd (shives) of a cannabis plant and lime.
The d9-THC limits for each product were purposefully omitted because these specifications still need to be defined for each product type. Leaving the d9-THC limit up to each authority having jurisdiction, however, is not the answer. It is fine if you comply with a lower d9-THC limit and want to sell into a market with a higher d9-THC limit, but what do you do if you are above the limit for the market you want to sell into? For now, you lose out on potential revenue.
I am not advocating that everyone starts selling “hemp” as “cannabis,” or vice versa, far from it. I am advocating for a more commonsense and inclusive approach to the marketplace though. One that would allow for the commercialization of materials that would normally be going to waste.
To me it is simply logical. There are no hemp plants, there are only cannabis plants that can be classified as hemp. There are no hemp products, there are only cannabis products that can be classified as hemp. In order for a cannabis product to be marketed, labeled, and sold as a hemp product, i.e. to be classified as a hemp, it would need to meet a set of specifications and be verified using a set of test methods first. But fundamentally the product would be a cannabis product being certified as “hemp”. And that is the shift in thinking that I am trying to get across.
The cannabis plant is an amazing plant and to fully capitalize on the potential of this crop we have to start allowing for the commercialization of cannabis raw materials that are not controlled by the UN Single Conventions, i.e. the seeds, stalks, roots, and leaves when not accompanied by the fruiting tops or the resin glands. Not to do so disenfranchises a significant number of stakeholders from participating in established legal avenues of trade for these goods. A concept proposed and endorsed the ASTM D37 in the published standard D8245-19: Guide for Disposal of Resin-Containing Cannabis Raw Materials and Downstream Products.
If you are stakeholder in the hemp marketplace, you may feel threatened by the idea of the market getting flooded with material, but how are the demands of the so called “green economy” going to be met without access to more supply? Organic hemp seed for food production is scarce but there is plenty of conventional hemp seed for the current demand, but what happens when hempmilk is positioned to displace soymilk in every major grocery store? To feed the growth of the human population and allow for a transition to a truly “green economy,” we need to ensure that the policies that we are putting in place are not excluding those looking to participate in the industry and disenfranchising stakeholders from burgeoning marketplaces, nor alienating a segment of the marketplace simply because their plant cannot be classified as “hemp”.
The Cannabis Extraction Virtual Conference will take place on June 29. This complimentary event will have four webinar presentations, all back-to-back and on the same day. You won’t want to miss this extraction and concentrates event. Stay tuned for announcements on the agenda, registration page and speaker lineup.
Cannabis, we have a problem. Legalizing adult use cannabis in California caused the demand for high-potency cannabis to increase dramatically over the last several years. Today, many dispensary buyers enforce THC minimums for the products that they sell. If smokeable flower products don’t have COAs proving the THC levels are above 20% or more, there is a good chance many dispensaries won’t carry them on their shelves. Unfortunately, these kinds of demands only put undue pressure on the industry and mislead the consumer.
Lab Shopping: Where the Problems Lie
Lab shopping for potency analysis isn’t new, but it has become more prevalent with the increasing demand for high-potency flower over the last couple of years. Sadly, many producers submit valid, certified COAs to the California Bureau of Cannabis Control (BCC), which show two to three times the actual potency value.
At InfiniteCAL, we’ve purchased products from dispensary shelves and found significant discrepancies between the analysis we perform and the report submitted to the BCC by the producer. So, how can this happen? Several factors are creating the perfect storm in cannabis testing.
Problems with Potency
Many consumers still don’t understand that THC potency is not the only factor in determining quality cannabis, and they are unwittingly contributing to the demand for testing and analysis fraud. It is alarming for cultivation pioneers and ethical labs to see producers and profit-hungry testing facilities falsifying data to make it more appealing to the unaware consumer.
Basically, what’s happening is growers are contacting labs and asking, “I get 30% THC at this lab; what can you do?” When they see our COA reporting their flower tested lower than anticipated, they will go to another lab to get higher test results. Unfortunately, there are all too many labs that are willing to comply.
I recently saw a compliant COA that claimed that this particular flower was testing at 54% THC. Understanding cannabis genetics, we know this isn’t possible. Another product I reviewed claimed that after diluting an 88% THC distillate with 10-15% terpenes, the final potency test was 92% THC. You cannot cut a product and expect the potency to increase. Finally, a third product we reviewed claimed 98% total cannabinoids (while only looking at seven cannabinoids) with 10% terpenes for a total of 108% of the product.
These labs only make themselves look foolish to professionals, mislead laymen consumers and skirt under the radar of the BCC with basic mathematical errors.
The Pesticide Predicament
Frighteningly, inflating potency numbers isn’t the most nefarious testing fraud happening in the cannabis industry. If a manufacturer has 1000 liters of cannabis oil fail pesticide testing, they could lose millions of dollars – or have it retested by a less scrupulous lab.
As the industry continues to expand and new labs pop up left and right, cultivators and manufacturers have learned which labs are “easy graders” and which ones aren’t. Certain labs can miss up to ten times the action level of a pesticide and still report it as non-detectable. So, if the producer fails for a pesticide at one lab, they know four others won’t see it.
In fact, I’ve had labs send my clients promotional materials guaranteeing compliant lab results without ever receiving a sample for testing. So now, these companies aren’t just tricking the consumer; they are potentially harming them.
An Easy Fix
Cannabis testing is missing just one critical factor that could quickly fix these problems – checks and balances. The BCC only needs to do one of two things:
Verifying Lab Accuracy
InfiniteCAL also operates in Michigan, where the Marijuana Regulatory Agency (MRA) has already implemented a system to ensure labs are maintaining the highest testing standards. The MRA will automatically flag all COAs which test above a certain percentage and require the product to be retested by multiple labs.
Labs are required to keep a back stock of material. So, when test results come back abnormally high from Lab A, then Labs B, C and D are commissioned to retest the material to compare data. If Lab A reports 40% THC, but the other labs all report 18%, then it’s easy to see Lab A has made an error.
By simply buying products off the shelves and having them blind-tested by other labs, it would be simple for the BCC to determine if the existing COA is correct. They already have all the data in Metrc, so this would be a quick and easy fix that could potentially solve the problem overnight.
For example, at InfiniteCAL, we once purchased 30 samples of Blue Dream flower from different cultivators ranging in certified COA potencies from 16% to 38%. Genetically, we know the Blue Dream cultivar doesn’t produce high levels of THC. When we tested the samples we purchased, nearly every sample came back in the mid-teens to low 20% range.
Labs Aren’t Supposed to Be Profit Centers
At InfiniteCAL, we’ve contacted labs in California where we’ve uncovered discrepancies to help find and flush out the errors in testing. All too often, we hear the excuses:
“If I fix my problem, I’ll lose my clients.”
“I’m just a businessman who owns a lab; I don’t know chemistry.”
“My chemist messed up; it’s their fault!”
If you own a lab, you are responsible for quality control. We are not here to get rich; we are here to act as public safety agents who ensure these products are safe for the consumer and provide detailed information about what they choose to put in their bodies. Be professional, and remember you’re testing for the consumer, not the producer.
Heather Ebling, Manager of Applications and Support, Medicinal Genomics
In this session, Heather Ebling compares the differences between molecular and culture based microbial testing, explains the advantages and disadvantages of each method and guides attendees through how to evaluate the two different microbial testing methods.
TechTalk: What can qPCR do for your Laboratory?
Nick Lawson, Field Application Scientist, Medicinal Genomics
The Cannabis Laboratory Accreditation Panel
Tracy Szerszen, President & Operations Manager, Perry Johnson Laboratory Accreditation (PJLA)
This panel, moderated by CIJ editor Aaron Biros, goes in-depth into the new ISO/IEC 17025:2017 version, changes from the 2005 version, the new transition timeline mandated by ILAC, common challenges labs face when getting accredited and much more.
TechTalk: Your Results Are Only as Accurate as Your Reference Standard
Michael Hurst, Global Product Manager- Reference Materials, MilliporeSigma
TechTalk: Columbia Laboratories
Kelly O’Connor, Client Service Representative, Columbia Labs
Don’t Hold Your Breath: Smoke/Vapor Analysis & Quantifying Quality
Markus Roggen, Ph.D., Complex Biotech Discovery Ventures
Dr. Roggen details his method, sample prep and protocols for smoke and vapor analysis. He discusses the chemical changes that occur when cannabis products are burned or vaporized, how testing of aerosols and gasses are performed and what smoke tests can tell us and how they might better shape product development.
With data forecasting expert BDSA predicting that the global cannabis market will reach $56B by 2026, there is no time to waste. Whether it’s Oklahoma, New York or even Macedonia, the frenzy is on. Investment decisions are immediate, and you have to be correct out of the box. This is where an expert like Andrew Lange and his company, Ascendant Management, come in. Andrew has designed more than 1.5 million square feet of cannabis facilities and moved them into profitable production in North America and Europe. One of his active customers is Onyx Agronomics in Washington. Bailee Syrek is the director of operations at Onyx and this is the story of the key points in designing a precision cannabis facility with state-of-the-art efficiency.
Andrew Lange, a navy veteran, runs a global cannabis consulting business based in Washington. With a “prove it to me” approach, he regularly tests the best new technologies in the facilities he designs. He integrates his knowledge of what works in practice into his subsequent facilities. One of his previous projects, Onyx Agronomics in Washington, started in 2014 and moved quickly into production in a retrofitted warehouse. Many of his best ideas started with Onyx, including some new innovations in the latest expansion there this month. Onyx is a tier 3 cannabis cultivator.
Bailee Syrek’s operation at Onyx currently produces 9,000 lbs. of dry trim bud per year in 8,000 square feet of canopy. She operates the state-of-the-art, clean room style, indoor grow facility around the clock, delivering 2.7 grams/watt from every square foot of canopy in her building. She runs a highly efficient facility.
Onyx has had an ongoing relationship with Ascendant Management and chose to leverage them again with their current expansion to increase their capacity further. Onyx uses a range of advanced technologies including aeroponic cultivation equipment and control software from AEssenseGrows to hit their metrics.
Precision, Quality & Consistency
“I look for ways that my clients can differentiate themselves,” says Lange. Maybe it’s his military background, but Andrew demands precision, quality and consistency in the operations he designs. “Cannabis is a just a plant really so we look for the highest performance grow methodology. I find that to be AEssenseGrows aeroponics,” says Lange. “The AEtrium Systems provides a good foundation to manipulate for grow recipes and business process. I add teamwork, communications, and operations procedures to that foundation.”
At Onyx, Bailee Syrek works closely with her channels. She invites her customers in regularly to review the Onyx cultivars and to cover their ideal requirements. These can range from bud size for their packaging to THC or terpene profiles (Yes, channels do want both higher and lower THC content for different consumers and price points). Based on that feedback, Bailee and Andrew work together to dial in the ideal grow recipe in the AEssenseGrows Guardian Grow Manager central control software. They push their target strains to optimize the results in the direction requested by their customers. For example, “How do you get the highest possible THC out of 9lb Hammer?” You’ll have to ask Andrew and Ascendant Management.
Driven by customer requests, Onyx is adding new strains to build on their innovative brand. Bailee expects to reach new levels of terpene bundles with Cheeseburger Jones, Koffee Breath, Shangri-La and OK Boomer. Utilizing Andrew’s expert knowledge, they can take typical sub-20% cannabinoid bundles and improve them using aeroponics and better controls, into standout aeroponic 30% packages.
The Onyx Vision
Bailee Syrek believes this is the most exciting time yet for Onyx. Delivering premium grade cannabis as a white label flower supplier for years, Onyx is a profitable and successful business. But even with doubling capacity every year, they are still having trouble keeping up with customer demand. Bailee wants to get to the point where she can always say yes and accept an order from their white label customers. With this objective, she again engaged Ascendant and Andrew to get beyond 15,000 lbs. of output in 2021 to make her customers happier. Beyond that basic expansion, she is also ambitious and is preparing plans for additional lines of revenue with their own proprietary flower, oil and derivative products.
“This expansion will be a new challenge,” says Syrek. “Flower production is in our wheelhouse. We have tighter operations, with the most consistent bud size, terpenes and test results in our state. These new products will require that same quality but now in new areas.”
Her Path to Leadership
Bailee started with Onyx in a compliance position that grew out of the constant demands for government licensing and reporting. In that compliance role, she had the opportunity to work a bit in every department, giving her a good understanding of all of the facility operations and workflows. All of that experience led her to eventually take over the operations leadership role. She instills care and effort to maintain the cleanest and most efficient operations possible. “With aeroponics, we don’t have to lug soil from room to room or in and out of the facility. This saves us a ton of work that we can redirect to plant health and maintenance,” says Syrek. “Medical precision and GMP quality is a given. Each room on average is 105 lights and one room manager and one cultivation technician take the room from clone/veg transfer to harvest as a two-person team.”
Bailee prides herself with results. “Medical grade precision is normal for us. We use medical grade SOPs for every aspect of our production.” Bailee has designed these guides into their control system that runs on the Guardian Grow Manager software. From sensor tracking, to performance graphs to time cards; everything is integrated in her performance monitoring.
A quality focus is very apparent in every Onyx flower room. Every watt of light energy is transferred to the pristinely manicured canopy. Naked stems feed nutrients up to the fat buds at the trained canopy surface. Fan leaves are removed and all possible energy turns into bud weight and potency. The room technician has a passion for plant health, table care and plant maintenance all the way through to the harvest bonanza.
What is the biggest challenge for Bailee as she drives the operation? Even at 105-110 grams per square foot per harvest, they are sold out. “Every customer wants to buy beyond our capacity. It is a good problem to have,” Bailee says. “Customers want our quality and love the consistency. This is the most exciting thing about our expansion. We will finally be able to make additional channels happy with high quality supply.”
This is where Andrew credits Onyx’s performance. “Most well running operations deliver 1.1-1.8 grams of dry trim bud per watt of electricity used in powering a grow room,” says Andrew. The Onyx grow formula results leave this in the dust. Running Fluence SPYDR 2i grow lights and the AEtrium System aeroponics, Onyx plants are delivering just shy of 4 lbs. per light with every harvest cycle. At 630 watts max output, that delivers ~2.7 grams/Watt, the most efficient operation he has seen. The Onyx process and execution works.
“Bailee is a great example as a professional. She builds a motivated team that executes better than her competition,” says Andrew.
At the same time, Onyx runs a highly space efficient nursery with just enough mother plants feeding energetic cuttings into the 4-layer stacked AEtrium-2.1 SmartFarms in their environmentally controlled clone room. They produce more than enough healthy clones to jump from veg to flower in the span of a week. Grow time, harvest turn time and no veg space, results in very efficient use of power in the complete operation.
Mirroring Onyx for Medical Grade Cannabis in Europe
Andrew Lange’s current passion is a green-field project in Portugal. Self-funded, Andrew says that this facility will be one of the first that is pure enough in operations to supply non-irradiated clean-room-level-quality cannabis beyond the precise standards required by European regulators. Current importers have not been able to clear the European standards for cleanliness without irradiating their buds. Other companies like Aurora have abandoned efforts to access the market due to the precision requirements. Typical methods used for fruit imports use gamma radiation to get bacterial counts down. This was tried with cannabis to sterilize buds, but the problem with cannabis is this degrades the quality of the flower.
Andrew’s Portugal facility will be using a sterile perimeter surrounding his grow space (mothers, clones/veg, flower rooms) and harvest and processing areas (dry, trim, packaging). Andrew creates a safe environment for healthy production. A steady harvest cleaning regimen is built into his operational designs from the beginning. All operators are trained in procedures to exclude pathogens and limit all possible transmission (airborne, physical/mechanical touching, or water carried). Every area is cleaned during and between harvests. Andrew is confident he will reach a consistent level of accuracy and purity beyond European requirements because it is routine in all of his designs.
Certified Efficiency is the Message
Good Manufacturing Practices (GMP) and Good Agricultural and Collection Practices (GACP) are required for certification and access to European markets. Andrew always builds tight operations, but in this case, his Portugal facility is designed with the fit and finish to be GMP and GACP compliant from day one with advanced air filtration and air management throughout.
Automated aeroponics is a foundation technology that Andrew recommends for his facility designs. The automatic data logging, report generation, cloud access and storage make this a foundational technology. Andrew does get some resistance from cultivators that are used to the classic soil media approaches but he explains that software configurable grow recipes, precision controls, zero soil/no pests and hyper-fast growth makes aeroponics the foundation of competitive advantage. Precisely controlled medical quality precision operations are built on top of this foundation.
The initial phase of the Portugal facility is 630 lights and this facility is Andrew’s latest personal investment. From secure perimeters to modular grow rooms and highly automated equipment, this location will be state-of-the-art in terms of grams/watt yields and renewable energy with an output of 6 metric tons per year. Solar powered electricity from a 4-megawatt farm will use Tesla megapacks for storage and be grid independent.
Technology & Innovation, Onyx & Ascendant
From his first experience with AEssenseGrows aeroponics, Andrew has been able to design complete grow recipes in the Guardian Grow Manager software with very tight precision on dosage. This makes it possible to create ideal recipes for each strain (nutrition, irrigation cycles, lighting and environmental management). This frees up the operations teams to focus on plant health and execution. The nutrients, pH, CO2, temperature and humidity, follow the Guardian directions that he sets.
Working with Bailee at Onyx, Andrew is now consulting on the post-harvesting side of operations (drying, trimming, extracts and packaging). In parallel with his efforts, Bailee is optimizing THC & terpene production on the cultivation side with UV lighting (considering far-right red frequency light recipe enhancements).
That is the Ascendant Management approach to innovation. Trial, test constantly, perfect ideas in practice. Optimize the results for consistent, high-quality results. Even while driving for the personal craft touch, use automation to increase efficiency of mundane, but important tasks. With these methods, Andrew believes that the Onyx labor cost is one third of typical soil media grow operations. Zero soil aeroponics offers many benefits. Bailee’s team is able to give each plant more attention and delivery better quality. Automation is a win-win for them.
Bailee finds that constant testing is useful for two things: one, great results, and two, surface the best talent with their hand’s-on approach.
Always Finish with People
Bailee says that her staff works incredibly hard. “We are a different grow, with better ergonomics on the job, aeroponics for precision and yields, and advanced technology at the leading edge in every part of our grow. No dirt up and down stairs. People are proud to work here. We are not your dad’s grow operation.”
“We promote from within. Everyone starts as a room tech and has the opportunity to move up. Teams are isolated by rooms so there is no contamination between rooms or humans. Put in the work, and you will get promoted with expansions, and grow with the company as we take a bigger share in the market.” Female employees make up almost half of the current staff, and Bailee encourages employees to refer their friends. “Good people invite good people,” she says.
Her training program introduces the technical aspects of their unique operation, the positive expectations and career path for every new employee. The social environment is friendly with good pay and regular raises. Each new employee fills a range of roles during their 1-month training circuit and are assigned to a cultivation space under a lead as an official cultivation tech at the end of 30 days. “One thing that we do more than at other grows is constant cleaning,” says Bailee. “This is an ever-present mantra for the staff.”
What is the role of the Quality Control (QC) Laboratory?
The Quality Control (QC) laboratory serves as one of the most critical functions in consumer product manufacturing. The QC laboratory has the final say on product release based on adherence to established product specifications. Specifications establish a set of criteria to which a product should conform to be considered acceptable for its intended use. Specifications are proposed, justified and approved as part of an overall strategy to ensure the quality, safety, and consistency of consumer products. Subsequently, the quality of consumer products is determined by design, development, Good Manufacturing Practice (GMP) controls, product and process validations, and the specifications applied throughout product development and manufacturing. These specifications are specifically the validated test methods and procedures and the established acceptance criteria for product release and throughout shelf life/stability studies.
The Code of Federal Regulations, 21 CFR Part 211, Good Manufacturing Practice for Finished Pharmaceuticals, provides the minimum requirements for the manufacture of safe products that are consumed by humans or animals. More specifically, 21 CFR Part 211: Subpart I-Laboratory Controls, outlines the requirements and expectations for the quality control laboratory and drug product testing. Additionally, 21 CFR Part 117, Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Human Food: Subpart B-Processes and Controls states that appropriate QC operations must be implemented to ensure food products are safe for consumption and food packing materials and components are safe and fit for purpose. Both food and drug products must be tested against established specifications to verify quality and safety, and laboratory operations must have the appropriate processes and procedures to support and defend testing results.
ISO/IEC 17025, General Requirements for the Competence of Testing and Calibration Laboratories is used to develop and implement laboratory management systems. Originally known as ISO/IEC Guide 25, first released in 1978, ISO/IEC 17025 was created with the belief that “third party certification systems [for laboratories] should, to the extent possible, be based on internationally agreed standards and procedures”7. National accreditation bodies are responsible for accrediting laboratories to ISO/IEC 17025. Accreditation bodies are responsible for assessing the quality system and technical aspects of a laboratory’s Quality Management System (QMS) to determine compliance to the requirements of ISO/IEC 17025. ISO/IEC 17025 accreditation is pursued by many laboratories as a way to set them apart from competitors. In some cannabis markets accreditation to the standard is mandatory.
The approach to ISO/IEC 17025 accreditation is typically summarizing the standard requirements through the use of a checklist. Documentation is requested and reviewed to determine if what is provided satisfies the item listed on the checklist, which correlate directly to the requirements of the standard. ISO/IEC 17025 covers the requirements for both testing and calibration laboratories. Due to the wide range of testing laboratories, the standard cannot and should not be overly specific on how a laboratory would meet defined requirements. The objective of any laboratory seeking accreditation is to demonstrate they have an established QMS. Equally as critical, for product testing laboratories in particular, is the objective to establish GxP, “good practices”, to ensure test methods and laboratory operations verify product safety and quality. ISO/IEC 17025 provides the baseline, but compliance to Good Laboratory Practice (GLP), Good Manufacturing Practice (GMP) and even Good Safety Practices (GSP) are essential for cannabis testing laboratories to be successful and demonstrate testing data is reliable and accurate.
Where ISO/IEC 17025 accreditation falls short
Adherence to ISO/IEC 17025, and subsequently receiving accreditation, is an excellent way to ensure laboratories have put forth the effort to establish a QMS. However, for product testing laboratories specifically there are a number of “gaps” within the standard and the accreditation process. Below are my “Top Five” that I believe have the greatest impact on a cannabis testing laboratory’s ability to maintain compliance and consistency, verify data integrity and robust testing methods, and ensure the safety of laboratory personnel.
Standard Operating Procedures (SOPs)
The understanding of what qualifies as a Standard Operating Procedure (SOP) is often misunderstood by cannabis operators. An SOP is a stand-alone set of step-by-step instructions which allow workers to consistently carry out routine operations, and documented training on SOPs confirms an employee’s comprehension of their job tasks. Although not required per the current version of the standard, many laboratories develop a Quality Manual (QM). A QM defines an organization’s Quality Policy, Quality Objectives, QMS, and the procedures which support the QMS. It is not an uncommon practice for cannabis laboratories to use the QM as the repository for their “procedures”. The intent of a QM is to be a high-level operations policy document. The QM is NOT a step-by-step procedure, or at least it shouldn’t be.
Test Method Transfer (TMT)
Some cannabis laboratories develop their own test methods, but a common practice in many cannabis laboratories is to purchase equipment from vendors that provide “validated” test methods. Laboratories purchase equipment, install equipment with pre-loaded methods and jump in to testing products. There is no formal verification (what is known as a Test Method Transfer (TMT)) by the laboratory to demonstrate the method validated by the vendor on the vendor’s equipment, with the vendor’s technicians, using the vendor’s standards and reagents, performs the same and generates “valid” results when the method is run on their own equipment, with their own technician(s), and using their own standards and reagents. When discrepancies or variances in results are identified (most likely the result of an inadequate TMT), changes to test methods may be made with no justification or data to support the change, and the subsequent method becomes the “validated” method used for final release testing. The standard requires the laboratory to utilize “validated” methods. Most laboratories can easily provide documentation to meet that requirement. However, there is no verification that the process of either validating in house methods or transferring methods from a vendor were developed using any standard guidance on test method validation to confirm the methods are accurate, precise, robust and repeatable. Subsequently, there is no requirement to define, document, and justify changes to test methods. These requirements are mentioned in ISO/IEC 17025, Step 7.2.2, Validation of Methods, but they are written as “Notes” and not as actual necessities for accreditation acceptance.
The standard speaks to identifying “changes” in documents and authorizing changes made to software but the standard, and subsequently the accreditation criteria, is loose on the requirement of a Change Control process and procedure as part of the QMS. The laboratory is not offered any clear instruction of how to manage change control, including specific requirements for making changes to procedures and/or test methods, documented justification of those changes, and the identification of individuals authorized to approve those changes.
Out of Specification (OOS) results
The documentation and management of Out of Specification (OOS) testing results is perhaps one of the most critical liabilities witnessed for cannabis testing laboratories. The standard requires a procedure for “Nonconforming Work”. There is no mention of requiring a root cause investigation, no requirement to document actions, and most importantly there is no requirement to document a retesting plan, including justification for retesting. “Testing into compliance”, as this practice is commonly referred to, was ruled unacceptable by the FDA in the highly publicized 1993 court case United States vs. Barr Laboratories.
Safe laboratory practices are not addressed at all in ISO/IEC 17025. A “Culture of Safety” (as defined by the Occupational Safety and Health Administration (OSHA)) is lacking in most cannabis laboratories. Policies and procedures should be established to define required Personal Protective Equipment (PPE), the safe handling of hazardous materials and spills, and a posted evacuation plan in the event of an emergency. Gas chromatography (GC) is a common test method utilized in an analytical testing laboratory. GC instrumentation requires the use of compressed gas which is commonly supplied in gas cylinders. Proper handling, operation and storage of gas cylinders must be defined. A Preventative Maintenance (PM) schedule should be established for eye wash stations, safety showers and fire extinguishers. Finally, Safety Data Sheets (SDSs) should be printed and maintained as reference for laboratory personnel.
ISO/IEC 17025 accreditation provides an added level of trust, respect and confidence in the eyes of regulators and consumers. However, the current process of accreditation misses the mark on the establishment of GxP, “good practices” into laboratory operations. Based on my experience, there has been some leniency given to cannabis testing laboratories seeking accreditation as they are “new” to standards implementation. In my opinion, this is doing cannabis testing laboratories a disservice and setting them up for failure on future accreditations and potential regulatory inspections. It is essential to provide cannabis testing laboratory owners and operators the proper guidance from the beginning and hold them up to the same rigor and scrutiny as other consumer product testing laboratories. Setting the precedence up front drives uniformity, compliance and standardization into an industry that desperately needs it.
21 Code of Federal Regulations (CFR) Part 211- Good Manufacturing Practice for Finished Pharmaceuticals.
21 Code of Federal Regulations (CFR) Part 117;Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Human Food: Subpart B-Processes and Controls.
ICH Q7 Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients; Laboratory Controls.
World Health Organization (WHO).
International Building Code (IBC).
International Fire Code (IFC).
National Fire Protection Association (NFPA).
Occupational Safety and Health Administration; Laboratories.
ASTM D8244-21; Standard Guide for Analytical Operations Supporting the Cannabis/Hemp Industry.
The word “hemp” has many meanings. Historically the term has been used as the common name for the Cannabis sativa L. plant. Just like other plants, the cannabis plant has two names, a common name, hemp, and a scientific name, Cannabis sativa L. After the ratification of the UN Single Conventions on Narcotic Drugs and Psychotropic Substances, in 1961 and 1972 respectively, the term started to be used to distinguish between resin producing varieties of the cannabis plant and non-resin producing varieties of the cannabis plant. Nowadays the term is generally used to refer to cannabis plants with a delta-9-tetrahydrocannabinol (d9-THC), a controlled substance, content equal to or less than the maximum allowable limit defined by each marketplace.
In the United States and Canada, the limit is defined as 0.3% on a dry weight bases, and until November 2020, in the European Union, the limit was defined as 0.2%. After years of effort the “hemp” industry in Europe was successfully able to get the limit raised to 0.3% to be in line with the United States and Canada – creating the largest global trade region for hemp products. But there exist several marketplaces around the world where, either through the consequences of geographic location or more progressive regulations, the d9-THC content in the plant can be substantially higher than 0.3% and still considered “hemp” by the local authority.
To address these variances, ASTM International’s Technical Committee D37 on Cannabis has been working on a harmonized definition of hemp, or industrial hemp, depending on the authority having jurisdiction, through the efforts of its Subcommittee D37.07 on Industrial Hemp. The following is a proposed working definition:
hemp, n—a Cannabis sativa L. plant, or any part of that plant, in which the concentration of total delta-9 THC in the fruiting tops is equal to or less than the regulated maximum level as established by an authority having jurisdiction.
Discussion: The term “Industrial Hemp” is synonymous with “Hemp”.
Note: Total delta-9 THC is calculated as Δ⁹-tetrahydrocannabinol (delta-9 THC) + (0.877 x Δ⁹-tetrahydrocannabinolic acid).
This definition goes a long way to harmonize the various definitions of hemp from around the world, but it also defines “hemp” as a thing rather than as a classification for a type of cannabis plant or cannabis product. This is a concept rooted in the regulatory consequences of the UN Single Conventions, and one I strongly disagree with.
The definition also leaves the total d9-THC limit open-ended rather than establishing a specified limit. An issue I will address further in this series.
Can “hemp products” only come from “hemp plants”?
If you are an invested stakeholder in the traditional “hemp” marketplace, you would say, yes.
But are there such things as “hemp plants” or are there only cannabis plants that can be classified as “hemp”? (The definition for hemp clearly states that it is a cannabis plant…)
There is no distinction between the cannabinoids, seeds, and fibers derived from a cannabis plant that can be classified as “hemp” and those derived from a cannabis plant that cannot. The only difference is the word: “cannabis,” and the slew of negative connotations that come along with it. (Negative connotations that continue to be propagated subconsciously, or consciously, whenever someone says the “hemp plant” has 50,000+ uses, and counting, and will save the world because it’s so green and awesome, but not the “cannabis plant”, no that’s evil and bad, stay away! #NewReeferMadness)
The declaration that “hemp products” only come from “hemp plants” has some major implications. “Hemp seeds” can only come from “hemp plants”. “Hemp seed oils” can only come from “hemp seeds”. “Hemp fibers” can only come from “hemp plants”. Etc.
What does that really mean? What are the real-world impacts of this line of thinking?
Flat out it means that if you are growing a cannabis plant with a d9-THC content above the limit for that plant or its parts to be classified as “hemp”, then the entire crop is subjected to the same rules as d9-THC itself and considered a controlled substance. This means that literal tons of usable material with no resin content whatsoever are destroyed annually rather than being utilized in a commercial application simply because a part or parts of the plant they came from did not meet the d9-THC limit.
It is well known that d9-THC content is concentrated in the glandular trichomes (resin glands) which are themselves concentrated to the fruiting tops of the plant. Once the leaves, seeds, stalks, stems, roots, etc. have been separated from the fruiting tops and/or the resin glands, then as long as these materials meet the authority having jurisdiction’s specifications for “hemp” there should be no reason why these materials could not be marketed and sold as “hemp”.
There are several reasons why a classification approach to “hemp plants” and “hemp products” makes more long-term sense than a bifurcation of the “cannabis” and “hemp” marketplaces, namely from a sustainability aspect, but also to aid in eliminating the frankly unwarranted stigma associated with the cannabis plant. #NewReeferMadness
That said, say you are a producer making shives from the stalks of cannabis plants that can be classified as “hemp” and then all of a sudden, the market opens up and tons of material from cannabis plants that cannot be classified as “hemp,” that was being sent to the landfill, become available for making shives. Would you be happy about this development? Or would you fight tooth and nail to prevent it from happening?
In this segment, we looked at the history of the term “hemp” and some of the consequences from drawing a line in the sand between “cannabis” and “hemp”. I dive deeper into this topic and provide some commonsense definitions for several traditional hemp products in Part 2 of Defining Hemp: Classifications, Policies & Markets.
With the signing of the Cannabis Control Act (the Act) on April 21, 2021, Virginia became the first southern state to legalize adult use cannabis and just the fourth state to do so through the legislature. Legalizing adult use cannabis through the legislature, as opposed to through the ballot box, is not the typical route states have followed up to now. Eleven of the sixteen states and the District of Columbia have legalized adult use cannabis through the use of ballot measures. Virginia joins Vermont, Illinois, New York and New Mexico (which legalized after Virginia) as one of the few states that have gone the legislative route. Under Governor Northam’s administration, the path to legalization was swift, taking less than four months from introduction to passage.
Governor Northam added amendments to the already passed Senate Bill 1406 and the General Assembly voted to approve those amendments, with the Lieutenant Governor breaking the tie in the Senate’s vote. Upon signing, Governor Northam called the law a step towards “building a more equitable and just Virginia and reforming our criminal justice system to make it more fair.” This message and the opportunities to promote social equity through a legal cannabis industry have been consistent points of advocacy made by supporters as the bill advanced to becoming law.
Prior to the Governor’s amendments, the Act under consideration set July 1, 2024 as the date on which both legal possession and adult use sales would begin. The Governor decided to accelerate the date for legal possession to July 1 of this year, a decision believed to have been influenced by data showing that Black Virginians were more than three times as likely to be cited for possession, even after simple possession was decriminalized in the state a year prior. The regulated adult use market is still set to begin making sales on July 1, 2024; however, it remains possible that this date could be advanced through the legislature in the meantime. Nevertheless, Virginia is on track to becoming the first southern state with an operating regulated commercial cannabis market.
Creating an Administrative Structure for the Adult Use Program
This sweeping fifty-page law creates the Cannabis Control Authority to regulate the cultivation, manufacture, wholesale and retail sale of cannabis and cannabis product. The Act further lays the groundwork for licensing market participants and regulating appropriate use of cannabis; defining local control; testing, labeling, packaging and advertising of cannabis and cannabis products; and taxation. The Act also contains changes to the criminal laws of the Commonwealth. Companion to the Act are new laws addressing the testing, labeling and packaging of smokable hemp products and manufacturing of edible cannabis products. Additionally, the Cannabis Equity Reinvestment Board was created to address the impact of economic divestment, violence and criminal justice responses to community and individual needs through scholarships and grants.
While persons 21 years or older may possess up to one ounce of cannabis and cultivate up to four plants for personal use per household beginning on July 1, 2021, there are a host of regulations to be written in order to regulate the adult use market. These regulations will be the devil in the details of how the regulated market will work. Regardless, the Cannabis Control Act does establish the framework for adult use cannabis that is unique to Virginia and designed to promote and encourage participation from people and communities disproportionately impacted by cannabis prohibition and enforcement.
The Cannabis Control Authority (CCA) will consist of a Board of Directors, the Cannabis Public Health Advisory Council, the Chief Executive Officer and employees. The Board will have five members appointed by the Governor and confirmed by the legislature, each with the possibility of serving two consecutive five-year terms. The Board is tasked with creating and enforcing regulations under which retail cannabis and cannabis products are possessed, sold, transported, distributed, and delivered. It is expected that the Board will begin discussing regulations next year and that applications for licenses for cannabis cultivation facilities, manufacturing facilities, cannabis testing facilities, wholesalers, and retail stores will begin to be accepted in 2023. Importantly, a Business Equity and Diversity Support Team, led by a Social Equity Liaison, and the Equity Reinvestment Board, led by the Director of Diversity, Equity and Inclusion, are to contribute to a plan to promote and encourage participation in the industry by people from disproportionately impacted communities.
Regulating Participation in the Market
The Act empowers the Board to establish a robust and diverse marketplace with many entry opportunities for market participants. Up to 450 cultivation licenses, 60 manufacturing licenses for the production of retail cannabis products, 25 wholesaler licenses and 400 licenses for retail stores can be granted. These numbers do not include the four permits granted to pharmaceutical processors (entities that cultivate and dispense medical cannabis) under the Commonwealth’s medical program.
In addition to the sheer number of licenses that can be granted, the Act devises a unique approach to addressing concerns of a concentration of licenses in too few hands and a market dominated by large multi-state operators. At the same time, it sets up a mechanism to capitalize two cannabis equity funds intended to benefit persons, families and communities historically and disproportionately targeted and affected by drug enforcement through grants, scholarships and loans. Over-concentration and market dominance concerns are addressed by limiting a person to holding an equity interest in no more than one cultivation, manufacturing, wholesaler, retail or testing facility license. This eliminates the ability of companies to be vertically integrated from cultivation through retail sales operations. However, there are two exceptions to the impediment to vertical integration. First, the Board is authorized to develop regulations that permit small businesses to be vertically integrated and ensure that all licensees have an equal and meaningful opportunity to participate in the market. These regulations will be closely scrutinized by those looking to enter Virginia’s regulated market once they are proposed. Qualifying small businesses could benefit substantially from the economic advantages commensurate with being vertically integrated, assuming they have the access to the capital needed to achieve integration and operate successfully. The second exception allows permitted pharmaceutical processors and registered industrial hemp processors to hold multiple licenses if they pay $1 million to the Board (to be allocated to job training, the equity loan fund or equity reinvestment fund) and submit a diversity, equity and inclusion plan for approval and implementation. Consequently, Virginia is attempting to fund, in part, its ambitious social equity programs by monetizing the opportunity for these processors to participate vertically in the adult use market.
Those devilish details of how this market will function, and how onerous compliance obligations will be, will emanate from those yet to be proposed regulations covering many areas and subject matters including:
Outdoor cultivation by cultivation facilities;
A testing program;
An application process;
Packaging and labeling requirements;
Maximum THC level for retail products (not to exceed 5 mg per serving or 50 mg per package for edible products);
Record retention requirements;
Criteria for evaluating social equity license applications based on certain ownership standards;
Licensing preferences for qualified social equity applicants;
Low interest loan program standards;
Personal cultivation guidelines; and
Outdoor advertising restrictions.
Needless to say, the CCA Board has a lot work ahead in order to issue reasonable regulations that will carry out the dictates in the Act and encourage the development of a well-functioning marketplace delivering meaningful social equity opportunities.
Much work needs to be done before July 1, 2024 to prepare for its debutThe application process for the five categories of licenses will be developed by the Board, along with application fee and annual license fee amounts. It is not clear how substantial these fees will be and what effect they will have on the ability of less-well-capitalized companies and individuals to compete in the market. The Act dictates that licenses are deemed nontransferable from person to person or location to location. However, it is not entirely clear that changes in ownership will be prohibited. The Act contemplates that changes in ownership will be permitted, at least as to retail store licensees, through a reapplication process. Perhaps the forthcoming regulations will add clarity to the transferability of licenses and address the use of management services agreements as a potential workaround to the limitations in license ownership.
Certain requirements particular to certain license-types are worthy of highlighting. For example, there are two classes of cultivation licenses. Class A cultivation licenses authorize cultivation of a certain number of plants within a certain number of square feet to be determined by the Board. Interestingly, Class B licenses are for cultivation of low total THC (no more than 1%) cannabis. Several requirements specific to retail stores are noteworthy. Stores cannot exceed 1,500 square feet, or make sales through drive-through windows, internet-based sales platforms or delivery services. Prohibitive local ordinances are not allowed; however, localities can petition for a referendum on the question of whether retail stores should be prohibited in their locality. Retail stores are allowed to sell immature plants and seek to support the home growers, an allowance that is fairly unique among the existing legal adult-use states.
Taxing Cannabis Sales
Given the perception that regulated cannabis markets add to state coffers, it is little surprise that Virginia’s retail market will be subject to significant taxes. The taxing system is straightforward and not complicated by a taxing regime related to product weight or THC content, for example. There is a 21% tax on retail sales by stores, in addition to the current sales tax rates. In addition, localities may, by ordinance, impose a 3% tax on retail sales. These taxes could result in a retail tax of approximately 30%.
Changes to Criminal Laws
Changes to the criminality of cannabis will have long lasting effects for many Virginians. These changes include:
Fines of no more than $25 and participation in substance abuse or education programs for illegal purchases by juveniles or persons 18 years or older;
Prohibition of warrantless searches based solely on the odor of cannabis;
Automatic expungement of records for certain former cannabis offenses;
Prohibition of “gifting” cannabis in exchange for nominal purchases of some other product;
Prohibition of consuming cannabis or cannabis products in public; and
Prohibition of consumption by drivers or passengers in a motor vehicle being driven, with consumption being presumed if cannabis in the passenger compartment is not in the original sealed manufacturer’s container.
These changes, and others, represent a balancing of public safety with lessons learned from the effects of the war on drugs.
The Act contains myriad other noteworthy provisions. For example, the Board must develop, implement and maintain a seed-to-sale tracking system for the industry. Plants being grown at home must be tagged with the grower’s name and driver’s license or state ID number. Licenses may be stripped from businesses that do not remain neutral while workers attempt to unionize. However, this provision will not become effective unless approved again by the legislature next year. Banks and credit unions are protected under state law for providing financial services to licensed businesses or for investing any income derived from the providing of such services. This provision is intended to address the lack of access to banking for cannabis businesses due to the federal illegality of cannabis by removing any perceived state law barriers for banks and credit unions to do business with licensed cannabis companies.
The adult use cannabis industry is coming to Virginia. Much work needs to be done before July 1, 2024 to prepare for its debut. However, the criminal justice reforms and commitment to repairing harms related to past prohibition of cannabis are soon to be a present-day reality. Virginia is the first Southern state to take the path towards legal adult use cannabis. It is unlikely to be the last.
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