by Michelle Rutter, NCIA’s Government Relations Manager
The 116th Congress just began, but there’s already been a flurry of new cannabis bills filed. Let’s take a look at some of the first pieces of legislation to be filed in the House of Representatives on the topic:
Bill: H.R. 420: Regulate Marijuana Like Alcohol Act Introduced by: Congressman Earl Blumenauer (D-OR) What It Does: This bill was introduced in the 115th Congress by now-Governor Jared Polis (D-CO). Filed in the 116th Congress by Rep. Blumenauer, this bill would remove cannabis from the Controlled Substances Act entirely. It would also transfer cannabis enforcement authority from Drug Enforcement Administration to a renamed Bureau of Alcohol, Tobacco, Marijuana, Firearms and Explosives. Both shipping or transporting cannabis into states that have not legalized it would continue to be prohibited. Last year, the bill garnered 26 cosponsors.
Bill: H.R. 493: Sensible Enforcement of Cannabis Act Introduced by: Rep. Lou Correa (D-CA) Additional cosponsors: Reps. Steve Cohen (D-TN), Don Young (R-AK), Dina Titus (D-NV), Matt Gaetz (R-FL), Eleanor Holmes Norton (D-DC), Salud Carbajal (D-CA), Peter DeFazio (D-OR), Katie Hill (D-CA)
What it does: This bipartisan bill seeks to enshrine the now-rescinded Cole Memo into federal law. The legislation directs the Attorney General, in enforcing the provisions of the Controlled Substances Act relating to cannabis, to focus on certain enforcement priorities that were outlined in the Cole Memo, such as:
Distribution of marijuana to minors.
Revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels.
Diversion of marijuana from States where it is legal under State law in some form to other States.
State-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity.
Violence and the use of firearms in the cultivation and distribution of marijuana.
Drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use.
The growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands.
Marijuana possession or use on Federal property.
This bill was previously introduced at the very end of the 115th Congress. NCIA is proud to have endorsed this legislation.
Bill: H.R. 127: Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2019 Introduced by: Rep. Steve Cohen (D-TN) Additional cosponsors: Reps. Don Young (R-AK) and Matt Gaetz (R-FL)
What it does: This bill would amend the Controlled Substances Act to state that regulatory controls and administrative, civil, and criminal penalties do not apply to a person who produces, possesses, distributes, dispenses, administers, tests, recommends, or delivers medical marijuana in compliance with state law. The bill also excludes “cannabidiol” (CBD) from the definition of “marijuana” and limits the concentration of delta-9-tetrahydrocannabinol (THC) in CBD to 0.3 percent on a dry weight basis. The bill also directs the Department of Health and Human Services (HHS) to terminate the Public Health Service’s interdisciplinary review process that is used to evaluate applications for medical marijuana research, opening up a multitude of research opportunities. The bill requires the DEA to license manufacturers and distributors of marijuana for medical research;, for HHS to register practitioners to conduct research, and for the Department of Veterans Affairs (VA) to authorize VA health care providers to provide recommendations and opinions to veterans regarding participation in their states’ cannabis programs.
Many more (possibly dozens!) of cannabis bills are expected to be filed in the next few months. NCIA will continue to track these pieces of legislation and endorse critical cannabis reforms on Capitol Hill.
The 116th Congress – What To Expect
by Michelle Rutter, NCIA Government Relations Manager
As the 116th Congress begins, the momentum behind cannabis reform has reached an unprecedented level. Let’s take a look at the top three things you can expect from cannabis legislation in the newest congressional session:
Successes in the House of Representatives, but an uphill climb in the Senate. The 116th Congress is the first time in eight years that Democrats have held control of the House of Representatives. As a result, it is expected that cannabis legislation will garner hearings, appropriations amendments will be expanded, and a bill could even be reach the Floor and be voted on! That being said, it’s important to remember that the Senate is still controlled by the more conservative Republican battle, and any cannabis amendments or legislation that reaches that chamber will have a very serious uphill battle prior to passage.
More cosponsors. In the 115th Congress, the House’s SAFE Banking Act (H.R. 2215) had a record breaking 95 cosponsors, while the Senate version (S. 1152) had 20. That’s nearly a quarter of the House of Representatives and a fifth of the entire Senate! Bills to reform IRC Section 280E saw a similar spike– at the end of 2016, the House’s Small Business Tax Equity Act had a mere 18 cosponsors, while the Senate version had four. At the end of December, the Small Business Tax Equity Act (H.R. 1810) has 46 cosponsors, while the Senate’s version (S. 777) has six. In the 116th Congress, you can expect these bills and others to continue to gather record-breaking numbers of cosponsors- in both the House and Senate.
New bills. There are cannabis bills that are introduced every session, like the banking bill, 280E bill, and various pieces of states’ rights legislation. In the 115th Congress, advocates saw multiple new cannabis bills get introduced, like the Marijuana Data Collection Act, the Marijuana Justice Act, and the MAPLE Act. As the 116th Congress continues, you can expect almost all of the cannabis related bills from last session to get reintroduced, but will likely also see a plethora of new legislation be filed that will address many different issues.
While the opportunities for cannabis reform are numerous, one thing is for sure: the 116th Congress will be one for the history books.
Join us on May 21-23, 2019 for NCIA’s 9th Annual Cannabis Industry Lobby Days in Washington, D.C., to make our voices heard on Capitol Hill! This event is complimentary and exclusive to NCIA members. Registration opens February 11.
VIDEO: NCIA Policy Webinar – Looking Ahead to 2019
As 2018 comes to a close, it’s a great time to sit down and reflect on the successes and challenges of 2018 for cannabis reform. We’re excited to present to you the first installment of our new quarterly Policy Webinar Series with NCIA’s Director of Government Relations Michael Correia, and Policy Council Chair Steve Fox. Watch the webinar and learn more about the successes our industry has had on Capitol Hill this year, the challenges that may be in store in 2019, and what you can do to take action.
Top Five Memorable Marijuana Moments In 2018
by Michelle Rutter, NCIA Government Relations Manager
As 2018 draws to a close, our Government Relations team in Washington, D.C. is feeling especially thankful this year – both for all of our members, and for all of the strides forward that cannabis policy made this year! Before 2019 begins, let’s take a look back on marijuana’s top five most memorable moments of 2018:
Cannabis wins big at the ballot box
There’s no doubt about it: America experienced a green wave on election night as voters all over the country cast their votes in favor of reforming cannabis laws and electing candidates that share those values. Voters in Michigan cast their votes for the legalization of adult-use cannabis, increasing momentum of our movement. At the same time, voters in Missouri and Utah were successful in legalizing medical cannabis, becoming the 32nd and 33rd states to do so, and despite significant hurdles. In addition to the ballot initiatives that were passed, Democrats took control of the House of Representatives, while Republicans maintained their control of the Senate. While this development surely means that cannabis policy will progress further than ever in the House in 2019, it also means that anything passed through that chamber will face significant hurdles in the more conservative Senate.
Shake-up at the Department of Justice and the rescission of the Cole Memo
On January 4, then-Attorney General Jeff Sessions announced the Department of Justice’s decision to rescind the “Cole Memo” and two additional memos related to marijuana enforcement policy. These memos, issued in 2013 and 2014, helped to clarify the Department’s response to state-legal cannabis activity. The rescission of the memo has not resulted in any major change in enforcement policy, rather, this continues to be a matter of prosecutorial discretion. On November 6, the day after the midterm election, Jeff Sessions resigned as Attorney General at the President’s request.
Congressional banking and 280E bills gain record co-sponsorship
As the momentum for cannabis reform grows, so has the number of cosponsors on marijuana bills in Congress. Most notable is legislation that would provide safe harbor to financial institutions that choose to service the cannabis industry. At the end of the 114th Congress in 2016, the House’s Marijuana Businesses Access to Banking Act had 39 cosponsors, while the Senate version had just 10. As we finish the 115th Congress, the House’s SAFE Banking Act (H.R. 2215) has 95 cosponsors, while the Senate version (S. 1152) has 20. That’s nearly a quarter of the House of Representatives and a fifth of the entire Senate! Bills to reform IRC Section 280E have seen a similar spike. At the end of 2016, the House’s Small Business Tax Equity Act had a mere 18 cosponsors, while the Senate version had four. Today, the Small Business Tax Equity Act (H.R. 1810) has 46 cosponsors, while the Senate’s version (S. 777) has six.
Canada implements adult-use cannabis laws
In October, Canada’s laws making marijuana legal for adults went into effect and licensed retail stores opened throughout the country. This move made Canada the second country in the world, after Uruguay, to formally legalize the recreational use of the plant. Canada is the first G7 and G20 nation to do so. Federal prohibition has effectively locked American cannabis companies out of legitimate financial markets and, in doing so, has provided a significant advantage to publicly traded Canadian firms. Changes to federal law are needed to enable American small businesses to compete on the emerging multi-billion-dollar global cannabis market. Without legislative action, U.S. cannabis entrepreneurs will miss out on opportunities to develop innovative new products, attract global investment funding, and expand their reach to capitalize on expanding international business opportunities.
NCIA’s 8th Annual Cannabis Industry Lobby Days
This year, 225 cannabis industry professionals descended on Washington, D.C. to lobby congressional offices on some of the issues they and their businesses are facing. In total, NCIA members met with nearly 300 offices on Capitol Hill! The cannabis industry has seen exponential growth in the mainstream support for regulated cannabis markets from both sides of the political aisle. This progress is a direct result of the uncountable number of personal stories told by our members each year at our annual Lobby Days events in Washington, D.C., so don’t forget to mark your calendars for May 21-23, 2019, so that you can join us for our largest event yet!
The 116th Congress will arrive in Washington, D.C. in January. With the change in leadership in the House of Representatives and the momentum at our backs, 2019 is shaping up to be one of the cannabis industry’s best years yet. Our Government Relations team looks forward to all of the opportunities we will be faced with in the new year, and we wish you a very happy holiday season!
End of Year Appropriations Deadline Looms
By Michelle Rutter, NCIA Government Relations Manager
As 2018 comes to an end, so does the 115th Congress. But, before the 116th Congress is sworn-in in January, an appropriations agreement must be reached before December 7, when the continuing resolution (CR) that is in place expires. That means if Congress doesn’t pass appropriations legislation by December 7, a partial government shutdown will occur.
Passing the bill in less than ten days will be an uphill battle. The President wants $5 billion appropriated towards a border wall and has threatened to veto the bill should it not include it. The Republican-controlled Senate has also asked for $1.6 billion worth of “pedestrian fencing” at the southern border. Should a shutdown occur, it will be the last chance for the President to win wall funding before Democrats take over the House majority in January.
There are a couple of different scenarios that could occur, but both bode well for cannabis advocates. First, Congress could pass another continuing resolution, which would include the current protections in place for medical cannabis patients, programs, and businesses. Alternatively, Congress could choose to pass an appropriations package that includes the Subcommittee on Commerce, Science, and Justice (CJS) bill, which also includes those same medical cannabis protections. Essentially, either way, medical cannabis protections remain in law.
This simple, one sentence appropriations amendment is the only thing standing in the way of the Department of Justice from prosecuting medical cannabis businesses and patients, and the process of getting it included into the federal appropriations bill every year can be incredibly difficult.
Moving into 2019, NCIA will continue to focus on ensuring that these protections remain in place, but also work to expand them to include adult-use cannabis businesses. In addition, NCIA will be using the appropriations process to advance other areas of cannabis policy, like curtailing the Treasury Department from prosecuting banks that choose to service the legal cannabis industry, and prohibiting the Department of Veterans Affairs from punishing veterans that choose to use cannabis in states where it’s legal.
All of these amendments will have good chances of passage in the Democratic-controlled House, but will face challenges in the Republican-controlled Senate.
Committee Blog: Transacting in Equity – The Basics
by Charlie Christopher, VP, Finance, Cirrata NCIA’s Finance and Insurance Committee
“A prudent man must seek to satisfy himself about the means to an end. This demands that he must revisit, again and again, the very elemental principles of his craft independent of how others think and act.” – Tony Deden
In businesses of all sizes it is common to transact in a number of currencies other than cash. The focus of this piece is on transactions involving common equity, the most fundamental unit of business ownership. The first section establishes a framework for how to view equity as currency, and what differentiates equity from other mediums of exchange such as cash. The second section introduces the process for creating reasonable projections based on sound logic. The third section demonstrates a somewhat novel application of concepts, and provides an example of the flexibility that can be introduced into the process. The conclusion is a reminder that these concepts can easily be misused, and that nothing should replace common sense when dealing with extreme uncertainty.
The Problem
Valuing any business is hard. Valuing a start-up is even harder still, not because of process, but because of the ambiguity associated with the output. When a valuation is based on multiple layers of high variance variables then the resulting distribution of value is rightfully broad. This poses a major challenge for operators and investors trying to agree on fair terms, and it can lead to irreparable damage to a young company.
Imagine for a second that you, and everyone else, have a crystal ball that can see the future with just enough variance to keep things interesting. How would that change the way you think about your equity? Would you be offering the same equity deals to your entire team? Would you be flexible with investors interested in your business? Of course not, you would look into the future every morning, update your projections and you would transact in equity in a similar manner to how you would with cash. Even though we do not have a crystal ball in the real world, it stands that to transact in equity with absolutely no opinion of value is the equivalent to being indifferent between paying $.10 or $100,000 for the same product or service.
Equity is a form of currency. It has value. However, its value has a built-in variance that rewards beating expectations, and punishes missing expectations. This is why equity awards are typically used to incentivize contributions that can increase the odds of achieving the former. The act of issuing the reward, in theory, immediately increases the value of the firm through the alignment of incentives. The common exaltation of the aforementioned qualitative attributes of the incentive over the quantitative attributes is also why the standard practice of ignoring a non-cash expense like share-based compensation is so indefensible. The value creation may be real, but to deny that a currency has transacted to create that value is to double count the benefit to shareholders.
The Process
Valuing a business begins from the top down and ends from the bottom up. Top down refers to projections based on the broader market while bottom up refers to firm specific capabilities extrapolated into the broader market. A common mistake operators make is to build up based on capabilities with no regard for how the aggregate ecosystem will react to the sum of all fundamental behaviors in the ecosystem. Starting from the top-down with a defensible position regarding both the size of the addressable market and the number of competitors participating in the market provides parameters for the business’s potential revenue.
Arguing for market share using a top-down analysis is fundamentally flawed if it does not reflect the true capacity of the business. A bottom-up analysis reflecting firm-specific capabilities should be compared to the top-down analysis for reasonableness. Ultimately, bottom-up analysis drives operating assumptions, and operating assumptions are the inputs to nearly every valuation technique.
I subscribe to the theory that posits that the variance in all of the assumptions can be quantified using an appropriate discount rate. In other words, if I’m uncertain and find my forecasted outcome to be highly unreliable I may choose to use a much higher discount rate to calculate the present value of the business than for a business with lower variance assumptions. When valuing a start-up company, I consider the corresponding ultra-high discount rate to cloud too much insight. For start-ups I first calculate a probability of firm failure in each of the forecast years and multiply my operating assumptions by the cumulative probability of success, I then use a more reasonable discount rate as if the firm was not highly speculative. This allows start-ups in the seed stage to more easily defend increases in value before launch. For example, the filling of a major executive leadership position justifies a small reduction in the probability of failure. Thus, your first executive hire has a reason to have received a higher percentage equity award than your last hire, even though the dollar value of the award might be equal. The process facilitates fair negotiations among all shareholders who may commit under vastly different circumstances and with different information. All too often this doesn’t take place, and the animosity that can develop as a result is as real as it is avoidable.
Valuation is admittedly more art than science. Many astute readers will point out that markets don’t operate in the orderly, fundamental matter I’ve proposed. Those critics are absolutely correct. It is a fair caution that not only are the trappings of certainty intoxicating, but sometimes simply observing how others are transacting is sufficient to make decisions. The market is often wrong, but it’s also often right. Remember to update your assumptions as new information becomes available.
Charlie is a Co-Founder of Cirrata where he lends his extensive knowledge from being both an entrepreneur as well as a securities analyst. As VP of Finance, Charlie combines his skills to assist clients through the application process, ongoing operations, and exit strategies.
Prior to joining Cirrata, Charlie co-founded a luxury women’s ready-to-wear label where he oversaw two separate rounds of funding as CFO. He has consulted numerous clients in the cannabis, construction, music, financial services and software industries in which his primary focus was on information systems, optimization, cash forecasting, securities offerings, licensing and capital allocation.
Member Spotlight: RoseRyan
In this month’s member spotlight we caught up with Maureen Ryan of RoseRyan, a finance and accounting consulting firm based in Silicon Valley that officially launched its cannabis solutionthis April. Finance is the language of business, and her firm, since 1993, has helped hundreds of companies get their financial house in order, efficiently and effectively, so they can go further, faster. Passionate about women in business and excited for the racial equity that she sees in the cannabis field, Maureen believes her firm’s best practices and proven approach are a match for many emerging growth companies in our field. To learn more about finance fundamentals, tune into our conversation with her colleagues that we hosted on the NCIA podcast on June 12.
Cannabis Industry Sector: Finance & Accounting for emerging growth companies and large enterprises
NCIA Sponsoring Member Since: August 2016
Tell me a bit about your background and why you launched your company?
My career at RoseRyan has mostly centered around the finance needs of fast-moving tech companies. That changed a couple of years ago after working with a cannabis biotech company and loving it. Around the same time, our consulting firm saw signs that recreational cannabis was headed for legalization in California, and it was then that we realized many cannabis companies of all sizes were going to need the kind of professional finance and accounting support that we offer.
Our focus on the high tech and life sciences markets here in Silicon Valley has put us in tune with the needs of companies that move rapidly and that need to work with government agencies to get their products market ready — much like the cannabis industry. We’ve responded with a specialized solution that will take cannabis companies further, faster.
What unique value does your company offer to the cannabis industry?
From working with fast-moving Silicon Valley companies for 25 years now, we’ve been able to apply our expertise and best practices to the cannabis market quickly and easily.
In addition, we know what investors want. Whether they are private equity or venture capital players, investors want a rational strategic plan, timely, reliable and accurate financials and a solid budgeting framework, just to name a few. Given the current cannabis environment with Canada, these expectations have become even more critical for companies to meet.
From working with over 275 life sciences companies through the years, we also know how to relate to government agencies, like the FDA. And from working with over 325 tech companies to date, we have experiences with helping companies scale fast, in a variety of business situations.
In a nutshell, we help cannabis companies get their financial house in order. Finance is the language of business, so companies absolutely need to get it right. No matter where they are in the business lifecycle — when starting up, growing at high velocity, tackling a tricky transaction or maturing as an ongoing enterprise—cannabis companies need to have their finance function tightly managed for ultimate success.
Our Cannabis Solution offers four levels of finance: 1) a rapid diagnostic review, 2) an outsourced CFO and accounting team to strategize and set up all the essential financial systems and processes, 3) partner referrals to build up or build out a trusted ecosystem, and 4) financial prep for potential merger and acquisition transactions.
Is cannabis that much different when it comes to finance and accounting?
Frankly, no. Let’s face it, when companies are starting out, their books are typically a mess, whether you’re talking about cannabis companies or companies in any other industry. Business leaders are typically not focused on their finance operations — they have so many other parts of the business to attend to, and we get that.
Many of the same business situations that happen to tech and life sciences companies are happening to those in the cannabis market. They’re dealing in the early stage with worries about survival and running on fumes, before they’re able to fundraise and determine their top investments for growth. When the business reaches velocity or even hypergrowth, they have careful decisions to make. Opportunities for a major transformation can spring up, like an IPO or a merger or acquisition. Every industry has their nuances, but many of the business situations that CFOs and accounting teams face are similar in nature.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
We recognize that women and people of color are heavily involved in this industry, which we love. As a woman-owned business, we support and promote the further advancement of diversity. We also find that working with cannabis companies to professionalize their financial operations helps the entire industry, as it creates a stronger, leveled up playing field for their business interactions. A strong finance function is essential for cannabis companies to raise funds. It’s imperative for their valuation, should an IPO, merger or acquisition transaction arise in the future. Accurate financials and tight operations are a direct reflection on the experience of the management team and, to a larger extent, the industry as a whole.
What kind of challenges do you face in the industry and what solutions would you like to see?
If a cannabis company lacks best practices in their essential finance operations, they’re going to run into trouble when dealing with hypergrowth situations. It happens with founders in every field—they’re passionate about their businesses yet many struggle to keep the business running at today’s standards. This is a challenge for any cannabis company that has blinders on and only seeks advice from other cannabis companies or experts who focus on just one industry.
What’s needed is a crystal clear understanding of the critical aspects of a company’s finances, or strategic decisions will be off-base because they don’t have accurate data on hand. Cannabis companies also risk a slowdown if they’re missing a key partner at a critical time, such as valuation, tax, marketing or legal expertise.
We’d love to see cannabis companies absorb the best practices and talent from other explosive-growth industries that’s tailored to meet their exact needs. No need to pave a new trail when one exists already.
Why did you join NCIA? What’s the best part about being a member?
We joined NCIA to be part of the industry-leading association that is dedicated to the industry’s success. NCIA brings key players together, inspires community, shares best practices and keeps us up to date on the industry trends and news. We also like that NCIA is an active investor in cannabis companies. By being part of NCIA, we can stay informed and play a vital role in this burgeoning industry.
What’s it take to be successful in your business? In addition to the June podcast with NCIA on finance fundamentals with RoseRyan, you can check out the firm’s webinar for California-based businesses here: http://bit.ly/thepotthickens
Member Blog: How Much Does it Actually Cost to Open a Dispensary?
Reading headlines about the cannabis industry, one might get the impression that cannabis business owners are all cashing out big. And while there are many success stories, high startup costs, ranging between $250,000 to $750,000, make the financial reality of opening a dispensary difficult for a lot of budding entrepreneurs.
But the growing demand for cannabis allows for great opportunity, even in the most saturated markets. Retailers who want to compete with big-box stores should work smart, focus on creating a great store experience, and invest in cannabis tech that streamlines operations to reduce cost.
Step 1: Licensing
The first step in opening a dispensary is getting a license. The licensing process, which varies based on location, is extensive and expensive. Expect to undergo thorough background checks and spend at least $5,000 on licensing fees.
In places like Washington, the number of licenses granted by the state are capped and only available by purchasing one off of a current licensee. This can run upwards of $25,000 plus legal fees.
Capital Requirements Preclude Many
Besides the licensing and possible legal fees, there’s another thing that precludes many from the industry: capital requirements. Before licensing, some states require proof that you can financially weather the true cost of operating a cannabis business. Depending on where you apply for a license, a local government may require proof that you have enough liquid assets to keep your business afloat in rough times.
Location, Location, Location
Finding a location for a cannabis dispensary isn’t impossible, but can be expensive. City and state regulations define the legal proximity dispensaries can be to a school, church, park, arcade, and/or anywhere else children might be likely to gather.
Finding a permissible location with foot traffic and parking might cost up to $100,000 per year. To keep customers coming back, it’s important to invest additional money to make the store friendly, welcoming, and modern.
The Cost of Cannabis-Friendly Banking
The legal ambiguity of cannabis creates a tenuous relationship with state-legal businesses. When banks work with U.S. cannabis businesses, they take on the risk, however unlikely, that federal enforcement priorities could change and cannabis-friendly banks could be targeted.
Most banks refuse to take on the risk. Others, like local credit unions, upcharge for their services and the risk incurred. Some banks charge up to $2,000 in holding fees every month for cannabis businesses!
Day-to-Day Costs & Smart Investments
You can’t run a dispensary without product, customers, and staff. In a state that allows for vertical integration, it can cost more than $500 per pound to grow your own cannabis; plus the inventory costs for edibles, topicals, and other products. To attract customers, you’ll need to invest $10,000 to $25,000 on marketing. The payroll costs for a staff of budtenders, store manager, and a master grower can total more than $250,000 annually. Finally, consider costly insurance policies, license renewal fees, taxes, legal retainers, and trademark protections.
Those day-to-day costs really rack up fast. A smart cannabis retail owner can save time and money elsewhere by investing early in technology that will optimize their operation. Investing $25,000 on hardware and software, including computers, an integrated point of sale system, and a full security system, can be a large upfront cost but could save your business in the end.
There are countless cannabis retail success stories. It’s challenging and expensive, but for a smart and informed entrepreneur, the upside is enormous. If you’re ready, download this free e-book to learn about how to open a dispensary.
Gary Cohen, CEO, leads Cova’s charge into the legal cannabis space by guiding the vision, strategic development, ‘go to market’ plans and culture.
Before joining Cova, Gary was a principal in over a dozen tech start-ups in the mobile communications industry ranging from small VC funded companies to Fortune 100 firms, including Onavo, which was later acquired by Facebook. In those companies he led sales, marketing, business analytics and market expansions. He has also held a multitude of leadership roles with Verizon and AT&T.
Gary holds a degree in finance with a master’s in marketing from the University of Colorado.
Member Spotlight: Tidal Royalty Corporation
In this month’s member spotlight, we hear from Paul Rosen, CEO of Tidal Royalty Corporation, a Toronto-based company providing financing for U.S. licensed cannabis operators looking to expand their operations.
Cannabis Industry Sector: Finance and Investments, ExpansionCapital Provider
NCIA Member Since: 2018
Tell me a bit about your background and why you launched your company?
I am a lifelong entrepreneur, having started my career as an attorney with my own firm before founding a number of companies in different industries. Within the cannabis industry, I was the co-founder of The Cronos Group (NASDAQ:CRON, CRON.V), a company that I led as CEO and President for 3 years. I am also a very active investor with over 100 investments in cannabis companies globally, I serve on the Boards of iAnthus Capital Holdings (IAN.C) and Hill Street Beverages (BEER.V), and I am an advisor to numerous companies in the industry.
I see a lot of similarities between U.S. cannabis today and the Canadian markets from 5 years ago, especially around the massive capital investments required to build out an industry of this magnitude. Unlike Canada, however, the lack of access to traditional capital markets makes it much more difficult for licensed U.S. operators to build the scale they will need in order to compete globally. I founded Tidal Royalty Corp. (CSE: RLTY.U) (OTC: TDRYF) to fill this market need and to provide growth-minded entrepreneurs with the resources they need to build sustainable businesses that positively contribute to society.
What unique value does your company offer to the cannabis industry?
Tidal Royalty is a publicly-traded company that provides licensed U.S. cannabis operators with the expansion capital that they need to scale their business. We write institutional-level cheques in the $5MM – $25MM range and have a world-class executive team that can assess and close deals quickly. But what makes us most unique is that we provide financing in exchange for a royalty on future revenue. This is most attractive to entrepreneurs in high-growth industries – like U.S. regulated cannabis – in that they get the benefit of a large capital infusion without dilution, and without the risk associated with debt. We are looking to align ourselves with best-in-class operators that will form the future of this transformative industry: when they do well, Tidal Royalty does well.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
As institutional-level capital providers, Tidal Royalty has a level of responsibility that goes beyond our duty to be prudent stewards of capital for our shareholders. That is, we look to back licensed operators that we feel will positively impact the industry as a whole, in the U.S. and globally. We don’t see these as being mutually-exclusive; the operators that understand their social responsibilities and are willing to accept them are the ones that have the opportunity to make out-sized returns in the long-term. As part of our investment diligence, we not only assess the business case, but also look at how operators interact with their communities and the impact they can have on the segment of the population that they interact with. We think this is important in and of itself, but it’s also simply good business practice.
What kind of challenges do you face in the industry and what solutions would you like to see?
One of the most significant hurdles for many operators is the restrictive banking landscape. The legacy banking environment that discourages many institutions from participating in the regulated cannabis industry poses massive logistical challenges and business risks.
The industry as a whole is working hard to show the level of sophistication and societal benefit that a regulated cannabis market can offer, but the lack of banking infrastructure really creates an environment for criminal activity and black-market operators to flourish. Licensed operators can’t get access to the most basic banking services available to other industries and have to deal with the risks associated with a cash-only economy. I would like to see the states – either on their own or in partnership with private enterprise – really push an agenda to resolve some of these issues. There are a lot of good initiatives proposed that need to get pushed forward to make a difference.
Why did you join NCIA? What’s the best part about being a member?
We joined the NCIA to be part of a like-minded community working to advance the interests of this industry. The level of engagement, innovation, and enthusiasm we’ve experienced from the NCIA organizers and members has been incredible. We’re looking forward to helping contribute in any way that we can.
New Policy Directives For Cannabis Issued By NCSL
by Michelle Rutter, NCIA Government Relations Manager
Last week, the National Conference of State Legislatures (NCSL) met in Los Angeles for their annual Legislative Summit. NCSL was created in 1975 with the goal of establishing a single national organization to support, defend and strengthen state legislatures. NCSL prides itself on being bipartisan and seeks to improve the quality and effectiveness of state legislatures, promote policy innovation and communication among state legislatures, and ensure that state legislatures have a strong, cohesive voice at the federal level.
At the Legislative Summit last week, NCSL hosted two separate panels on cannabis policy. The first was titled “Crossroads: States, the Federal Government and Marijuana,” while the second was titled “Changing Federal Landscape: Financial Services for Marijuana Businesses.” NCIA’s own Director of Government Relations, Michael Correia, spoke eloquently on the banking panel and educated attendees and legislators about the importance of cannabis business’ access to financial services.
NCSL isn’t the only policy related group to show interest in cannabis policy: both the U.S. Conference of Mayors and the National Association of Counties have recently adopted similar positions. In June, a group of 12 governors, both Republican and Democrat, signed a letter to congressional leadership asking that they pass the STATES Act.
Following the summit, NCSL issued two new policy directives related to cannabis: the first stated that NCSL “maintains that the federal government should respect state decisions to regulate cannabis, including hemp in non-FDA approved cannabis products,” while the second said “NCSL acknowledges that due to the expansion of legal cannabis, legitimate business enterprises need access to financial institutions that provide capital, security, efficiency, and record keeping.”
We couldn’t agree more.
Video: Another Successful NCIA Lobby Days
NCIA’s Aaron Smith re-caps another successful Cannabis Industry Lobby Days! Watch this video to hear more about NCIA Members’ experiences and why you should plan to join us next year in D.C.
Are you an industry leader looking to invest in continued national advocacy for the industry but not yet a member of NCIA?
NCIA’s staff and professional lobbying consultants work year-round in our nation’s capital to build support for the cannabis business community and the policy changes needed for our industry to reach its full potential. That work has led us to the tipping point we are seeing today and it’s all been made possible by the financial support of our members.
Adding your name to the growing list of responsible businesses behind this effort will bring us even closer to reaching the day when the cannabis industry is treated fairly under federal law.
Already a member of NCIA but want to enhance your support for this vital work? Sponsor a quarterly Cannabis Caucus event in a city near you! All profits from event sponsorships support the efforts of our robust team in D.C.
NCIA Update From Capitol Hill
NCIA’s team in Washington, D.C. and our allies in Congress have been busy advancing cannabis reforms on Capitol Hill over the last couple of weeks. The Congressional appropriations process for the FY2019 federal budget is well under way and cannabis has been at the center of some of the debates around government spending.
Last week, the Senate Appropriations Committee approved legislation that would renew protections for state medical cannabis programs when the current spending budget expires in September. The language, which was introduced by Sen. Patrick Leahy (D-VT), prevents the Department of Justice from using any resources to target medical cannabis patients or providers who are in compliance with state laws.
While this provision has been amended into the budget since 2014, this is the first time that this provision has been included in the original language of the spending bill by either chamber of Congress. Thanks to the hundreds of member-businesses that have invested in NCIA’s work on Capitol Hill over the years and the growing public support for national cannabis reforms, this policy is no longer a controversial issue for Congress.In fact, leading up to the Senate hearing, Sen. Lankford (R-OK) attempted to include a budget rider that would effectively nullify the medical cannabis protections but later withdrew it, citing lack of support.
Over on the House side, an amendment offered by Rep. David Joyce (R-OH) which would have restricted the Treasury Department from using tax dollars to sanction banks for providing financial services to the legal cannabis industry came very close to passing but ultimately did not make it into the budget package. NCIA is working with our allies in the Senate to include the banking protections in that chamber’s version of the federal budget in the days ahead.
Another champion for social justice and sensible cannabis policies, Rep. Barbara Lee (D-CA), introduced a first-of-its-kind resolution bringing attention to the racially discriminatory enforcement of marijuana prohibition. Lee’s Realizing Equitable & Sustainable Participation in Emerging Cannabis Trades (RESPECT) Resolution calls on states with legal cannabis to enact policies to ensure that people of color and communities that have suffered the most under prohibition policies have equal access to business opportunities within the emerging legal cannabis industry.
NCIA applauded Rep. Lee and the bipartisan group of lawmakers who are leading the charge on tackling this important issue.
Meanwhile, other nations may be surpassing the U.S. in enacting sensible marijuana policies. Just today, the Canadian Parliament passed legislation that would legalize adult-use cannabis for our neighbor to the North beginning in October 2018. For more information about how the U.S. cannabis industry risks falling behind other nations due to outdated federal laws, download NCIA’s recent white paper, “How the U.S. is Falling Behind in the Global Cannabis Market.”
Stay engaged with NCIA for more news about the advancement of federal cannabis reforms and to learn about how you can get more involved.
The Cannabis Business Banking Crisis
By Rachelle Lynn Gordon, NCIA Editorial
The fledgling legal cannabis industry has faced numerous challenges since California voters made the state the first to approve the plant for medical use in 1996. Since then, an additional 29 states and the District of Columbia have legalized cannabis for either medical and/or adult-use purposes yet it still remains a Schedule I controlled substance in the eyes of the federal government. This has caused immense headaches for cannabis business owners in a multitude of ways – especially when it comes to balancing the books. The majority of traditional banking institutions refuse to work with clients that touch the cannabis plant, leaving many businesses to operate as cash-only while at the same time missing out on the traditional financial and lending opportunities given to other businesses.
“Being forced to hire an armored truck just to pay taxes or provide payroll isn’t only a hassle – it’s also extremely dangerous,” says Harry Resin, who longs for the day when he can open a business checking account for his cannabis company, URB Delivery. “People’s livelihoods – and frankly their lives – are constantly at risk when you’re dealing with large amounts of currency.”
Lack of security isn’t the only detriment to cannabis business owners unable to find banks who will work with them. Business loans, savings accounts, 401Ks, and credit lines are all out of reach for those wishing to develop their operations and plan for the future.
“I would love to be able to expand my operations but because I don’t have the option to take out a small business loan, I either have to get loans from friends and families or potentially give up equity to private investors,” Resin adds. “It makes things difficult.”
While many believe that it is illegal for banks to do business with those in the marijuana space, it turns out the opposite is true.
“We actually have regulations on how to bank the cannabis industry, but most banks don’t want to go through the expense and hassle of opening new departments,” explains Jim Marty, CEO of Bridge West CPA. “They’re already making tons of money, so they don’t feel the need to enter a new space. It’s going to take Congressional action on legalization before the big players enter in.”
While it’s not clear how exactly cannabis reform will play out, Marty cautions that while moving cannabis to Schedule II status could be positive for advocates of legalization, it may also negatively affect the entrepreneurial activity the emerging cannabis industry has shown.
“Right now, we have a lot of start-ups and small businesses that are getting funding from angel investors or private equity funds. If cannabis becomes Schedule II, there’s a chance that Big Pharma, Big Tobacco, and Big Alcohol will come in and there will be two or three major producers. So something that could fix a lot of the problems may do more harm than good.”
Marty notes that the introduction of bills such as The SAFE (Secure and Fair Enforcement) Banking Act (S. 1152, H.R. 2215), which would offer protections for state-legal financial institutions working with marijuana businesses, are steps in the right direction for the cannabis industry but that it is going to take hard work and perseverance by all in the community before real change is made.
Help us grow even more support for the SAFE Banking Act in Congress. Contact your members of Congress and urge them to support federal protections for financial institutions that work with the regulated cannabis industry.
Learn more in this report by NCIA’s Legal and Banking Committee: Investigating the Role of Financial Institutions in the Legal Cannabis Industry NCIA’s Legal and Banking Committee, comprised of NCIA members within that sector, produced this white paper following a meeting with California State Treasurer John Chiang and other cannabis industry leaders in mid 2017. The paper provides discussion and evaluation of challenges faced by businesses operating within the legal cannabis industry, while highlighting some of the benefits the industry brings to financial institutions and the communities they serve. (February 2018)
Our Members in Action at NCIA’s 2018 Cannabis Industry Lobby Days
by NCIA Editorial Staff
The cannabis industry has seen exponential growth in the mainstream support for regulated cannabis markets from both sides of the political aisle. This progress is a direct result of the relationships NCIA has built on Capitol Hill, as well as the personal stories told by our members each year at our annual Lobby Days events in Washington, D.C. NCIA’s 8th Annual Cannabis Industry Lobby Days, hosted May 21-23, was the industry’s most impactful fly-in yet, as our members made more inroads to Congress at a time when the nation has reached a tipping point in the fight to protect legal cannabis.
“So many more people keep coming to Lobby Days which is amazing to see,” said Karson Humiston, founder of Vangst. She’s one of Forbes’ 30 under 30 and the only female in cannabis to make the list. She’s focused on telling members of Congress about the potential for job creation and the economic impact of a fully recognized cannabis industry. “We are talking about jobs as much as possible in order to educate members of Congress about the economic stimulation regulated cannabis is bringing to the states and the need for federal legalization,” she said.
NCIA announced the release of its 2018 State Cannabis Progress Report during this year’s Lobby Days. The publication outlines a myriad of economic and social benefits already being realized by states with successful cannabis programs, including job creation, tax revenue, and reductions in crime and teen use.
So far 2018 is shaping up to be much different from the past seven years, largely because of Republican backlash against Attorney General Jeff Sessions attempting to ramp up federal interference in state cannabis programs by rescinding the Cole Memo. Historically, the GOP has been less publicly supportive of reforming cannabis laws, although there has been a strong current of support among certain segments of the party. Now, they listen and many have even joined us in support of banking and tax reforms needed for our industry to reach its full potential, in addition to their traditional support of federalism issues related to cannabis. Advocates, patients, and NCIA member-businesses all over the United States are keeping this positive momentum going.
At the Lobby Days welcome reception on the evening of Monday, May 21, NCIA Executive Director Aaron Smith said he was delighted with the turnout. “There are so many new faces, so many old friends, and Lobby Days veterans,” he told the audience of cannabis professionals, who had just arrived in Washington prior to the two full days of meetings with congressional offices. “Starting tomorrow, we will descend upon Capitol Hill to show lawmakers what a responsible, politically engaged cannabis industry looks like.” He called Lobby Days one of the cannabis industry’s most important events of the year.
NCIA member and founder of Washington, D.C.’s National Cannabis Festival and the National Cannabis Policy Summit, Caroline Phillips, said that she was proud to see so many members coming to her backyard to demonstrate their unity. “This is a really wonderful opportunity to share with members of Congress the diverse and innovative ideas of the cannabis industry and to show off the professionalism, creativity, and care that the people in the industry put into their work, “she added. “I think a lot of members on the Hill are starting to understand the cannabis industry is a lot more than just stereotypes, and for them to have one-on-one interactions with some of the best professionals in our industry is extraordinarily valuable.”
New to Lobby Days was Attorney Blake Mensing. He was eager to join the crowd of professionals to advocate for the fair treatment of cannabis businesses. “I think that this is the eighth year that this is happening really shows that the industry is coming out of the shadows and the momentum has built to the point that there’s a small probability that things are going back to the way they were [prior to the reform victories of the last decade].” Mensing founded The Mensing Group after he left his job as a Municipal Attorney in Massachusetts to start a cannabis-only practice. “It’s the first time I’ve ever had fun being a lawyer,” he remarked before heading into Senator Orrin Hatch’s (R-UT) office.
Professional football player Mike James also joined NCIA this year to advocate on behalf of his fellow athletes who would prefer to treat their health issues with medical marijuana instead of opiates. The active NFL running back has played for the Tampa Bay Buccaneers and the Detroit Lions during his career, which has wreaked havoc on his body, leaving him with chronic pain that he used to treat with opioids. “Within the NFL, I’m trying to go through their process and change policy. That way, hopefully, they can be an example for society,” he said. Currently a free agent, he’s the first and only active player with a medical marijuana card.
From the need to expand medical access to cannabis, to tax and banking reform, to addressing the injustice of racially disproportionate marijuana enforcement, NCIA hit the Halls of Congress to educate members of Congress and their staffs on what’s happening in their own backyards and the successes of regulating cannabis.
For example, when it comes to tax reform, Heather Sullivan of 3C Consulting said the cash-flow is only one of the issues they have to worry about from the 280E tax burden. “It’s a tough decision come tax season,” she said. “Do you set aside those tax rates so you don’t have that money to use for other things for your business, or do you play the game and run the risk that you’re not going to get audited?” Many cannabis businesses face similar issues, which can effectively ruin a company over time.
There were many Congressional offices that were receptive to the efforts and positions of NCIA members during Lobby Days. Heather took a meeting with Sen. Bernie Sanders’ (I-VT) office, for example, and after leaving the meeting she felt that it went wonderfully, stating, “Senator Sanders is a proponent for the safe and regulated use of cannabis whether in the medical side or the adult use side, so it was a meeting that for us was an opportunity to tell Bernie and his staff how much we appreciate the hard work that he’s done, ask him what we can do as an industry to help them continue the progress that they’ve already made and learn more about where his focus is.” Sullivan is well-versed in the issues facing cannabis businesses today and knows many other officials are still in need of convincing.
In spite of heavy opposition from Attorney General Jeff Sessions, as well as House leadership, the cannabis industry saw a huge victory when protections for medical marijuana were included in this years’ fiscal budget. Now, with the help of our members who flew in to speak about their personal issues and experiences, we can all look forward to an even more progress and a better outlook for the U.S. cannabis industry.
VIDEO: Spring Policy Update From Aaron Smith
Watch this important policy update from NCIA’s Aaron Smith to learn more about the recent policy news and pro-cannabis legislation recently announced by several prominent members of Congress. Despite heavy opposition from Attorney General Jeff Sessions, the cannabis industry has stronger support than ever. Get the scoop in this video update.
Walk the halls of Congress with us at #NCIALobbyDays
NCIA’s Lobby Days are less than three weeks away on May 21-23, 2018. In our 8th consecutive year of holding these important meetings with Congressional offices in Washington, D.C., many NCIA members have been excitedly looking forward to this event all year long. For newer members of NCIA or those who simply have not lobbied before, you’re probably wondering what it’s all about and how it works. This event is unlike any other conference or event you’ve experienced.
Watch this video to see and hear what it’s like to join hundreds of your industry peers for two incredible days of valuable networking and important advocacy work. Join us in creating a stronger, unified cannabis industry. Learn more and register now before Friday, May 18 to join us in D.C. this year.
Why it’s Critical For Cannabis Business Owners to Advocate for Policy Reform
by Rachelle Lynn Gordon, NCIA Editorial Contributor
Cannabis legalization reform has been in the works for years and will certainly continue for years to come due to the plant’s Schedule I status. In addition to the activists and organizations who have paved the way for marijuana legalization for decades, such as NORML, Marijuana Policy Project, and Students for Sensible Drug Policy (SSDP), cannabis business owners are now at the forefront of what will most certainly be a multi-billion dollar industry within a short matter of time. But why is it important for these cultivators, dispensary owners, and investors to be directly involved with legalization advocacy?
“Advocacy is critical at this stage, where there is still so much progress to be made at the state and federal levels,” says David Murét, Co-founder & COO of Viridian Staffing. “While I believe that national legalization is now a foregone conclusion, the form in which it takes and who it will end up benefiting is still an open question.”
At this point in time, 30 states and the District of Columbia have legalized medical and/or adult-use cannabis, each one with their own set of rules and regulations. As more and more states begin to come online and design their own programs, lawmakers will look to states where cannabis is already legal in order to learn from both successes and mistakes. At the federal level however, things are far more complicated.
While marijuana remains an illegal drug in the eyes of the federal government, certain protections are in place for businesses that are operating in compliance with their own states’ regulations. Several members of Congress representing these states have been pushing for even further protections and/or straight legalization, in spite of current Attorney General Jeff Sessions’ staunch anti-cannabis stance. In January, Sessions rescinded the Cole Memo, which had previously stated that federal funds shall not be directed towards enforcing federal cannabis policy within states that have passed for those operating in compliance with the items stated in the memo. However, this doesn’t mean that state prosecutors have to go after compliant businesses
Fortunately, the move was a moot point. A rider bill in the federal budget proposal, which is essentially a must-pass in order to prevent a government shutdown, maintained the protections that the Rohrabacher-Farr amendment (now Rohrabacher-Blumenauer amendment), which prevents the DOJ from going after state-legal medical cannabis. A bipartisan group of 62 members of Congress sent a letter to House appropriations leaders calling for action.
“We respectfully request that you include language barring the Department of Justice from prosecuting those who comply with their state’s medical marijuana laws,” the lawmakers, led by Reps. Dana Rohrabacher (R-CA) and Earl Blumenauer (D-OR), wrote. “We believe such a policy is not only consistent with the wishes of a bipartisan majority of the members of the House, but also with the wishes of the American people.” These protections are now included through September 30th.
David Sutton, President & COO of NanoSphere Health Sciences, agrees that time is of the essence in order to create new legislation that will positively impact the industry in years to come.
“Cannabis business owners and professionals have to participate in advocacy,” he argues. “No matter how many states adopt some form of cannabis legalization, the industry still needs change at the federal level. Without a federal shift in cannabis policy, operators in the industry will remain hampered and handcuffed from growth.”
Many canna-business owners are not only involved with pro-legalization policy efforts with the industry’s future in mind, but also the end consumers. High-profile cases of medical marijuana patients becoming ill due to flower containing mold and instances of widespread pathogen prescences from certain cultivators have increased efforts to prevent these products from getting to market.
“We have a responsibility to ensure this business grows in the right way,” explains Brett Johnson, Founder & CEO of Spectrum-Gro. “We have to be the adults in the room. I am always advocating for the end users – we need to guarantee safe and consistent products that are free from harsh chemicals and other pathogens. If the current leaders in this industry do not advocate for the future, there could be negative results across the board – from cultivation to the consumer.”
There are many ways business owners and professionals within the cannabis space to get involved with advocacy. NCIA Lobby Days brings hundreds of industry professionals and thought leaders to Washington, D.C. in order to tell their stories to lawmakers and push for cannabis reform. In addition, working with local organizations within their own states and jurisdictions is a wonderful way for entrepreneurs to spread awareness and potentially help build legislation in their communities.
“If we want to see how big the industry could be and how many lives can be changed for the better, you cannot simply rely on just hope, everyone needs to act,” adds Sutton. “Change comes from the masses and the masses need each and every owner and professional to participate in industry advocacy.”
Rachelle Lynn Gordon is a Minneapolis-based writer and reporter and graduate of Hamline University. She has contributed to publications such as Cannabis Now Magazine and High Times.
VIDEO: Aaron Smith invites you to #NCIALobbyDays this May 21-23
Over the last several years the cannabis industry has experienced unparalleled economic growth. But, as business owners in the industry, we know first hand that this success also comes with persistent challenges. As long as we still experience the crippling effects of federal policies like 280E and unfair banking regulations, our success is merely potential.
This is why it is essential that cannabis business owners are also industry advocates. With the challenges posed by the current administration and the uncertain federal policies governing our industry, it is critical that we make our voices heard on Capitol Hill.
Join 300+ cannabis industry professionals at NCIA’s 8th Annual Cannabis Industry Lobby Days on May 21-23 in Washington, D.C. to advocate for our industry and forge a unified front with the industry’s most politically engaged leaders. Register before April 30 for a chance to win tickets and travel for two to #CannaBizSummit July 25-27.
Watch this video to hear more from NCIA’s Co-founder and Executive Director Aaron Smith.
For more information about NCIA’s 8th Annual Cannabis Industry Lobby Days,
VIDEO: Save The Date For NCIA’s 8th Annual Lobby Days!
JUST ANNOUNCED! On May 21-23, 2018, NCIA Members will descend on Capitol Hill in Washington, D.C. for the 8th year in a row.
WHAT IS LOBBY DAYS? Every year, the National Cannabis Industry Association hosts the annual Cannabis Industry Lobby Days in Washington, D.C. This year, Lobby Days will bring over 300 cannabis industry professionals together to make their voices heard in the halls of Congress.
WHY ARE LOBBY DAYS IMPORTANT? With victories in eight states across the country during the 2016 presidential election, as well as the challenges posed by the new administration, fixing federal policies is more critical than ever. This year, we will continue to emphasize the importance of protecting legal cannabis businesses and patients, reforming section 280E of the federal tax code, and solutions to the banking crisis, all of which are critical to respecting state marijuana laws. Our team in Washington, D.C., works everyday to make the industry’s voice heard, but nothing matches the power of a personal story personally told.
Watch this short video to see highlights from last year’s 7th Annual Cannabis Industry Lobby Days, and to learn more about why you should plan to join us this year as we create momentum for cannabis policy reform in the halls of Congress.
Legal and Banking Committee: White Paper – Financial Institutions
By Dana Chaves, Ms. Mary Staffing/Hybrid Payroll
Vice Chair of NCIA’s Legal and Banking Committee
During our inaugural meeting in Oakland California in June of 2017, the Legal and Banking Committee discussed the impending issues impacting the cannabis industry. It was decided that the biggest issue that needed immediate attention was of course banking and the inability for businesses in the cannabis space to obtain and maintain a checking account in order to pay taxes, bills and more importantly payroll for employees.
As a group we decided that writing a white paper and subsequently a supporting PowerPoint slide deck to present to financial institutions, executives and board members in a lunch-and-learn environment would be the most effective way to educate not only financial institutions but also state regulatory agencies as well on how to work together on the best practices for mitigating risks surrounding the Bank Secrecy Act and resources needed for compliance.
It is the hope of the LBC Committee to assist financial Institutions in a nationwide effort to begin the process of protecting the communities where marijuana is legal and by legitimizing the industry by allowing banking and lending services to both business owners and their employees.
Video: Cannabis Amendments Blocked in Appropriations – now what?
In a late-night vote on Thursday September 6th, the House Rules Committee blocked a full house vote on all cannabis-related appropriations amendments.
Fortunately, Congress passed a Continuing Budget Resolution which does keep the Rohrabacher medical marijuana protections in the budget until December 8th of this year, and more importantly for the long term, those protections currently included in the Senate’s Appropriations bill for the next fiscal year so Congress still has a chance to protect patients and state-legal cannabis businesses in conference committee.
What can you do? Watch the video to hear more from NCIA’s executive director Aaron Smith.
And log on to www.thecannabisindustry.org/SupportLeahy to contact your Senators!
Top 5 Amendments To Watch For In Congressional Committee Next Week
by Michelle Rutter, NCIA Government Relations Manager
Every year, Congress must pass appropriations legislation to fund the government for the upcoming fiscal year. This annual budget bill, which is currently set to expire on September 30th, has been one of the only avenues by which pro-cannabis reform language can be inserted into federal law– even if only for a year at a time.
But, like most things in Washington, D.C., the appropriations process is lengthy, complicated, and chock full of procedure.
Early next week, the House Rules Committee will hold a hearing to discuss amendments to the upcoming appropriations bill that will fund the government for FY2018. The Rules Committee is used by leadership to maintain control over the House floor, and is heavily stacked in favor of the majority party (by a 2:1 ratio). Despite that, over a dozen cannabis related amendments have been filed and submitted by various members of Congress, but it is up to the Rules Committee to determine which provisions will be ruled “in order.” Let’s take a look at a few of the amendments that, if passed, could significantly affect the cannabis industry:
Rohrabacher-Blumenauer Amendment: This provision, formerly known as the Rohrabacher-Farr amendment, has been included in the federal budget since 2014. The amendment bars the Department of Justice from interfering with states’ medical cannabis laws and businesses. Those protections will expire on September 30th if this amendment is not renewed. The amendment has 12 cosponsors: seven Republicans and five Democrats.
McClintock-Polis Amendment: First introduced in 2015, this amendment would ban the Department of Justice from interfering with states’ adult-use cannabis laws and businesses. When voted on in 2015 on the House floor, the amendment narrowly failed.
Heck Amendment (1): This amendment would protect financial institutions that choose to service the cannabis industry from interference from the federal government. The provision protects banks in adult-use states, medical cannabis states, and CBD-only states.
Heck Amendment (2): The second cannabis related amendment introduced by Congressman Heck would prohibit any changes to the guidance issued by the Financial Crimes Enforcement Network titled “BSA Expectations Regarding Marijuana-Related Businesses.”
Heck Amendment (3): Similar to the second Heck amendment, this provision would prohibit the Department of Justice from revoking the guidance issued by the Financial Crimes Enforcement Network titled “BSA Expectations Regarding Marijuana-Related Businesses.”
It is important to note that in recent years, House Republicans have essentially shut down the appropriations process by not allowing any controversial amendments (including cannabis) to be ruled “in order”. Just a few months ago, the Rules Committee blocked a measure that would have allowed Veterans Affairs physicians to talk to their patients about medical cannabis in states where it’s legal. Should this happen next week, NCIA will be working closely with our allies and Members of Congress to ensure that the Senate’s version of the budget bill, which does include the Rohrabacher-Blumenauer amendment, is passed into law.
Navigating Congress and all of its procedural quirks can be stressful and difficult, but that’s what NCIA is for. Stay tuned for updates on appropriations throughout September as we continue to watch this process unfold.
Granting credit has not yet become standard in the cannabis market, but as discussed in my article “Trade Credit in Cannabis,” published in the May issue of mg, I believe it will be in the future. Therefore, it is important that a company create a credit policy to define how it will manage its credit and collection processes and evaluate credit risk. Once that is accomplished, the next, and most important, step is to develop a credit application.
Why do you need a credit application?
A credit application provides basic information about a customer’s business and offers measures of protection that will increase the ultimate collectability of an account if the customer doesn’t pay. Companies in the cannabis market may aid their collection efforts by requiring all customers, even those that are on cash terms, fill out a credit application. I cannot emphasize enough how many times my firm, AG Adjustments (AGA), has been successful in recovering a client’s past-due monies because the clients took a proactive approach and obtained a well-drawn-up credit application.
The credit application is one of the primary tools available for protecting a company and controlling credit risk when extending trade credit to customers. Remember, taking a check from a customer is a form of credit. Even customers who are paying cash on delivery should fill out a credit application.
What is a credit application?
A credit application is a contract between seller and buyer. A good credit application will benefit the seller; a bad one, the buyer. Therefore, it is important to be certain the credit application, whether electronic or on paper, contains all the safeguards and guarantees available to reduce risk.
Securing a credit application does not guarantee payment, but it is one of the more significant documents to assist in making good credit decisions and ultimately collecting past-due accounts receivable and associated collection fees. The adage “the sale is not complete until the money is in the bank” is as true today as ever. A good credit application will assist in getting money into the bank.
What do companies selling into the cannabis market need to know to control credit risk?
A credit application is the first step in gathering information about potential customers. Even if customers pay in cash, the day will come when that system changes, and getting information about accounts at the start of business relationship is key. The more you know about its debtors, the better. In addition, collecting credit information will make it easier to determine exactly how much credit to extend a customer.
Never assume all information on the application is correct. Verify the information provided before granting credit. The sales department must make sure every customer fills out and signs a credit application prior to delivery of any goods or services, even if the customer is paying C.O.D.
A credit application serves two purposes: It is a data-gathering tool and a contract. As a contract, it specifies the rights and obligations of both the customer and the creditor. The application should be written in a way that provides the creditor an advantage if business relationship with the client falters. As the saying goes, “Credit is not a right but a privilege.”
Verifying the credit application
The first thing to do once an application is obtain a commercial credit report from a leading credit bureau such as Dun & Bradstreet or Experian. Many prospective customers may not have a lengthy credit history, but that will change as the cannabis industry moves forward. Contact at least three trade-credit references, as well as the applicant’s bank, to verify the existence of accounts. Be sure all references are legitimate, or at least exist if one or more are difficult to contact. Any false information on the credit application is a strong indicator the potential customer may not be reliable. If the buyer is looking for a substantial credit line, review their financials, especially a statement of cash flow. If the applicant is operating in a negative cash position, ensure they will have enough cash available to pay their debt. Limit their credit line or, at the very least, modify payment terms if it seems an applicant may have a cash flow problem.
After credit is extended
Periodic credit reviews are a necessity. Account defaults arise with existing long-term customers as well as new ones. Customer credit limits should be reviewed periodically—at minimum, once a year. Obtaining current credit bureau reports about the largest customers annually is a good idea. Stay on top of aging accounts receivable. If a customer is always sixty to ninety days past-due on part of their balance, they are only one period away from becoming a problem.
When trade credit becomes the norm in the cannabis industry, asking a new customer to fill out a credit application will become standard practice. Currently, this is not the case in the cannabis industry; nevertheless, AGA recommends companies operating in the market implement sound credit policies and processes now in order to prepare for the near future.
Sam Fensterstock is the SVP of Business Development at AG Adjustments, a leading provider of 3rd party commercial collection services and a member of the NCIA’s Finance & Insurance Committee. Sam has spent his entire business career as an entrepreneur and senior executive in the commercial credit & collection space. He has been a founder and played a key role in the dynamic growth of several leading niche commercial credit risk management companies and is considered an expert in the order to cash and credit and collection process. Prior to joining AG Adjustments, Sam was the Director of Business Development at PredictiveMetrics, a statistical based credit and collection scoring and modeling company that he helped grow and sell to SunGard (FIS) in 2011. Sam can be reached at samf@agaltd.com or 631-719-8096.
Photo Credit: Cafe Credit via Flickr, under the Creative Commons License
Member Spotlight: GENIFER M
This month, we’re highlighting long-time NCIA Member and cannabis advocate Genifer Murray, who recently launched her line of luxury cannabis-themed jewelry, GENIFER M, with the aim and intention to “elevate the conversation about cannabis through artisan jewelry.”
Cannabis Industry Sector: Accessories/Products
NCIA Member Since: 2012
Tell me a bit about your background and why you launched your company?
I launched GENIFER M to start the conversation about cannabis. With more than seven years of experience working in the cannabis industry, I have always been passionate about educating the public on the positive power and healing benefits of cannabis; GENIFER M is luxury cannabis inspired jewelry that aims to do just that through artisan jewelry.
My cannabis career started in 2010 when I co-founded one of the first cannabis testing labs in the U.S., CannLabs based in Colorado, where I was one of the first female CEOs in the cannabis industry. My passion and role as CEO became to be a champion for health and safety for patients. My mission with CannLabs was to provide safe and quality medicine to cannabis patients, which resulted in a bigger mission: to help others and the larger community that need this medicine through lobbying for its legalization. While lobbying, I wanted to better represent the cannabis industry and make a statement that illustrated cannabis in a non-threatening and elegant way. As a result, GENIFER M was born.
My dad, Glenn Murray, a technically trained and internationally recognized gemologist, made me a 2.5 carat diamond pave indica leaf lapel to wear with my suits while I was lobbying with NCIA and the Governor’s Task Force for Amendment 64 (ending marijuana prohibition). I wore the pin everywhere and could see it was not only changing minds, but starting conversations with people that traditionally wouldn’t openly discuss or inquire about cannabis. The pin created a movement, creating a non-threatening space for educating consumers about cannabis and its benefits. GENIFER M is an extension of that conversation and was launched to change the way people perceive, interact, and experience cannabis through luxe style and handcrafted quality jewelry.
What unique value does your company offer to the cannabis industry?
Our company is extremely unique in the fact that we are using a lifestyle to start the conversation about cannabis. GENIFER M creates luxury fashion that empowers, educates, and elevates the conversation about cannabis and what it means to each person who wears a leaf. Each GENIFER M cannabis inspired jewelry piece is designed to open discussions about topics of cannabis in a non-threatening way; we aim to create a space in which you can fully express your beliefs, hopes, and passion for the healing properties of cannabis with the mission to make a difference in people’s lives. It shatters traditional perceptions of cannabis to reverse 90 years of the propaganda in mainstream culture.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
As business owners in the cannabis industry, we each have a responsibility to move this industry forward in the best manner possible, which is why GENIFER M is the alternative to mass production and traditional cannabis perceptions. We believe in the higher side of purchasing power and style — and making a difference in people’s lives through cannabis inspired jewelry. At GENIFER M, we want to give you the power to share your story and lead you to a lifestyle that embraces what cannabis means to you while honoring the progression from “pot culture” to “cannabis couture.”
What kind of challenges do you face in the industry and what solutions would you like to see?
There are several challenges like no traditional banking, the 280E tax problem, and of course the stigma, which still has a lot to do with why people are hesitating in the decriminalization of marijuana. However, we need more science to overcome the myths and stigma surrounding cannabis! We need the studies, clinical trials, and research. Thankfully the U.S. is finally allowing some of that to take place. I also see pharma as a huge challenge. As a cannabis community we need to work together to help end the pharma era and provide people with natural and holistic medicine — not synthetically made or chemically compounded products. Ultimately, creating platforms for cannabis education is the key to overcoming the challenges this industry faces
Why did you join NCIA? What’s the best part about being a member?
I joined NCIA because we needed a national voice to be heard in D.C. I wanted to help educate lawmakers and the public about the issues challenging the industry, to help prepare for the issues that nobody knew about back in 2012. I also joined because the NCIA community and its members provided me support through my cannabis entrepreneurial journey; they knew exactly what I was going through and became a great network founded on the mentality of helping each other grow and succeed. We are all working together to pave the way for the industry.
For more information about GENIFER M, or to purchase its products and help start the conversation about cannabis, please visit www.geniferm.com.
By The Numbers: NCIA Members Make It Happen In The Halls Of Congress
by Michelle Rutter, NCIA Government Relations Manager
While 2017 has had some political unknowns, one thing is for sure: cannabis legislation in Congress has more support than ever — and NCIA members have helped make that happen.
In mid-May, NCIA held its 7th Annual Cannabis Industry Lobby Days in Washington, D.C., where 250 industry professionals came together on Capitol Hill to attend more than 300 scheduled meetings. Since then, there has been a substantial increase in the number of cosponsors on cannabis-related bills compared to the last congressional session.
Last session, during the 114th Congress, Rep. Ed Perlmutter (D-CO) introduced the Marijuana Businesses Access to Banking Act, which would have created a safe harbor for financial institutions to serve marijuana-related businesses. At the end of the two-year session, the bill had 39 cosponsors.
Earlier this year, during the 115th Congress, Rep. Perlmutter introduced his new bill, the Secure and Fair Enforcement (SAFE) Banking Act (H.R. 2215). That bill currently has 47 cosponsors with nearly a year and a half left in the session to gain more support. Since NCIA’s Lobby Days in May, the SAFE Banking Act has added 18new cosponsors.
There has also been a substantial increase in the number of cosponsors on the House of Representatives bill that addresses the 280E tax problem. Last session, Rep. Earl Blumenauer (D-OR) introduced the Small Business Tax Equity Act, which ended the session with 18 cosponsors.
This year, NCIA was successful in helping secure Rep. Carlos Curbelo’s (R-FL) leadership on the Small Business Tax Equity Act of 2017 (H.R. 1810), which has been instrumental in gaining the 25 cosponsors the bill currently has. That legislation has gained 13new cosponsors since NCIA’s annual Lobby Days.
In addition to an increase in cosponsorship of cannabis-related bills, there’s also been an uptick in support for appropriations amendments at the committee level. At the end of July, the Senate Appropriations Committee adopted an amendment that would allow the Department of Veterans Affairs (V.A.) to recommend medical cannabis in states. That amendment passed by a vote of 24-7 — the most votes this measure has ever received in the Senate.
As the appropriations process continues through the summer, it’s likely that more cannabis-related amendments will be brought up and voted on, including votes dealing with protections for medical marijuana businesses and banking. NCIA is confident that if congressional leadership allows these measures to be voted upon, they will receive unprecedented levels of support.
The industry’s united voice makes a difference on Capitol Hill, and it can be seen in the numbers. To learn more about NCIA’s annual Cannabis Industry Lobby Days, you can click here.
Member Spotlight: Yerba Buena Farms
In this month’s member spotlight, we check in with the team at Yerba Buena Farms, based in Oregon. Yerba Buena was recently named one of the top 100 green companies to work for in Oregon. Operations Manager Laura Rivero tells us more about their company and the way they manage their staff through self-care “wellness days” and volunteering for charitable organizations.
Yerba Buena Farms
Cannabis Industry Sector:
Cannabis Cultivation
NCIA Member Member Since:
May 2017
Tell us a bit about your background and why you launched your company?
We launched YB with the intention of bringing a holistic approach to the cannabis business. These include fair labor practices, research and innovation, organic practices, sustainability, and bringing a diverse group of people together to achieve a common goal.
What unique value does your company offer to the cannabis industry?
Our company is focused on consistency and quality in both our product and business practices while maintaining full compliance and integrity. We are helping to set standards across the board, elevating the cannabis industry as a whole and inspiring others.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
We do the right thing every day and with every decision. It is not always about the bottom line and the ability to cultivate a socially responsible organization is a key benchmark in our organization. We have been recognized in every sector of the industry and beyond for exemplary practices, and we are committed to pushing the envelope to increase the standards for other businesses, regardless of their industry. We were the first (and so far only) cannabis company to make the 100 Best Green Workplaces in Oregon, placing 9th, and shining a light on this industry as a potential leader in sustainable business practices.
We participate in organizations that are helping push forward positive change and standards, such as the Cannabis Certification Council (CCC), which is dedicated to setting national organic and fair labor standards for cannabis, the Oregon Cannabis Association (OCA), which is dedicated to protecting the cannabis industry on local, state, and federal levels, and we are part of the Resource Innovation Institute (RII), which leads in sustainable design and resource efficiency for the cannabis industry.
In addition to participating in other organizations that are making a difference, we understand that it all truly starts within our own organization. We are committed to paying our employees a family wage and provide excellent health benefits that are covered 100% by the company. We have monthly wellness days to promote self-care and teach personal wellness strategies, as well as regular get-togethers and team building events. Our team volunteers with many charitable organizations in order to give back to our community in a more meaningful and interactive way. We provide in-depth training to all of our employees on all areas of cannabis in order to increase the ambassadorship of our company. We take the opportunity and responsibility to be leaders in this industry and help to shape it to become a legitimate and respected part of the national economy, reducing the unfounded stigma, and allowing cannabis to change the world for the better.
What kind of challenges do you face in the industry and what solutions would you like to see?
Access to information both internally and externally. The industry does not have modern operating systems to adequately manage the business of cannabis production, forcing us to create our own solutions internally at great expense. Externally, banking and taxation are two areas where YB would like to see national solutions.
Why did you join NCIA? What’s the best part about being a member?
We joined NCIA because of the work accomplished and in progress on a national and state level. NCIA has represented this plant for years, and we are excited to support these efforts. The information provided by the NCIA regarding market trends, pricing, state-specific data, etc., is incredibly valuable.
Last month, more than 250 cannabis industry professionals came to D.C. for NCIA’s 7th Annual Cannabis Industry Lobby Days. In this month’s video newsletter, we capture highlights from this energizing two days of advocacy, education, and community. Watch the video to re-live the experience, or live vicariously through your fellow NCIA members. And plan to join us next year to add your voice!
Were you there? How did your meetings on Capitol Hill go? What was your favorite part of the experience? Please send a brief testimonial of your experiences to NCIA Communications Manager Bethany Moore by emailing bethany@thecannabisindustry.org.
Thank you to the co-chairs of NCIA’s Policy Council for their premier sponsorship of our 2017 Cannabis Industry Lobby Days:
The Cannabis Industry Takes D.C. – Highlights from NCIA’s 7th Annual Lobby Days
by Michelle Rutter, NCIA Government Relations Manager
With the uncertainty that the new administration has brought the cannabis industry, it’s become more important now than ever before to be proactive in government and in our nation’s capital. Last month, NCIA did just that by hosting our 7th Annual Cannabis Industry Lobby Days. 250 cannabis industry professionals joined us in Washington, D.C., to meet with more than 300 Capitol Hill offices and tell their stories.
Lobby Days kicked off with a breakfast and training session for our attendees, where they learned lobbying basics and were briefed on our talking points. There, attendees met with their groups and gathered their materials to drop off in Capitol Hill offices for staff.
Once the training session was complete, we led our attendees down to our group photo location. Every year, NCIA has nearly doubled the number of participants at Lobby Days.
Following our (very large!) group photo, meetings on Capitol Hill commenced. We scheduled more than 300 meetings with congressional opponents, advocates, members from relevant committees, and others. In addition to the meetings we had scheduled, we also dropped in on various offices and left information about our issues with staff for them to review. In all, we made contact with nearly all of the 535 congressional offices on the Hill!
Simultaneously during our Hill meetings, NCIA hosted a private luncheon for Rep. Carlos Curbelo (R-FL), the new sponsor of H.R. 1810: The Small Business Tax Equity Act, which addresses the unfair burden of 280E faced by the cannabis industry. Over the years, NCIA has consistently worked to increase our Capitol Hill advocates and are thrilled that Congressman Curbelo will be leading the charge on 280E reform.
After a busy day of meetings on Capitol Hill, NCIA hosted a fundraiser for the NCIA-PAC, the Political Action Committee (PAC) for cannabis industry professionals. We had six members of Congress show their support by joining us: Reps. Earl Blumenauer (D-OR), Salud Carbajal (D-CA), Carlos Curbelo (R-FL), Ruben Gallego (D-AZ), Jared Polis (D-CO), and Dina Titus (D-NV).
We were thrilled to raise $60,000 for the NCIA-PAC, which supports federal candidates who are open to the challenges and concerns our industry faces, support cannabis reform at the federal level, and introduce or support pro-cannabis legislation.
Our second day got off to a great start with a press conference held in front of the United States Capitol Building. NCIA executive director Aaron Smith was joined by seven members of Congress (Reps. Blumenauer, Steve Cohen [D-TN], Curbelo, Diana DeGette [D-CO], Eleanor Holmes-Norton [D-DC], Polis [D-CO], and Titus [D-NV]) to address the need for reform federal marijuana laws.
Overall, it was an incredibly successful Lobby Days, and our biggest yet! We’ve already seen co-sponsorship on cannabis-related bills increase, and it is undoubtedly related to the meetings and personal stories NCIA members shared. We look forward to seeing you all in Washington, D.C., for our 8th Annual Cannabis Industry Lobby Days in 2018!
*Editor’s note: This blog is an excerpt of a full article which appeared in MG Magazine.
We attended the MJBIZ show in Las Vegas last fall and were fortunate to speak withmany companies that operate in virtually every aspect of the emerging cannabis market. The one thing they all hoped for, and felt confident would happen, is that the banking system will become available to the industry sooner rather than later.When that happens, business in the cannabis market is going to change dramatically. Access to the banking system means access to trade credit. When trade credit becomes available to growers, manufacturers, wholesalers, distributors, and retailers serving the cannabis market, things are going to change. At every level, the industry is going to have to learn how to provide and deal with managing trade credit and its inherent risk.
What is trade credit?
Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. The system commonly is used by business organizations as a source of short-term financing. It is granted to customers who have a reasonable amount of financial standing and goodwill.
Many of the growers and manufacturers we spoke to at the conference, specifically those operating in the Colorado market, already have bank accounts and are extending limited amounts of credit. They accept checks (a form of credit) from their customers, and in many instances, they give customers up to fifteen days to pay their bill. These companies and cannabis entrepreneurs all agree: as the cannabis market matures, the business is going to change. In fact, whether you recognize it or not, you already use some type of trade credit to operate. Your rent is due monthly, your utilities are due monthly, etc. You are extended credit on a limited basis to operate and grow your business.
More and more states are passing laws legalizing medical and recreational cannabis use, and companies entering the industry are going to want to access the credit markets and use this money to fuel their expansion. A true trade credit system, at every level of the industry, will need to come into existence. Mainstream corporate America operates in this environment and the cannabis industry will as well. It’s just a matter of time. The financial underpinning that guides the nascent cannabis market today must develop to meet the industry’s growth needs. The way cannabis companies transact business is going to change, for the positive, and trade credit will fuel its growth.
Federal regulations force most companies operating in the cannabis space today to deal primarily in cash. If you look back at emerging industries, operating only in cash doesn’t foster an environment for growth. Think of it this way: in a cash environment, a company with $1,000 in cash can buy only $1,000 worth of goods, but in a trade credit environment, a company with $1,000 in cash and $2,000 in trade credit can buy $3,000 worth of goods. Potential income from retail sales has tripled.
So, for the cannabis market to grow, it cannot be a cash-only business. Without a doubt, the banking industry is on the side of the cannabis industry. Banks do not make money from cash businesses. They want a part of the billion-dollar cannabis market, and they will exert formidable pressure on federal lawmakers to reclassify marijuana as a legal substance, at least under medical supervision. Currently, nearly 300 banks offer services to cannabis-based businesses, but eventually the entire banking industry—more than 5,000 commercial U.S. banks—will join them. The question is, what must businesses do to implement a trade-credit model that fosters sustainable growth? It is imperative that companies understand how to create and implement smart trade credit policies.
Companies that operate in the cannabis industry will migrate toward a trade credit environment in which a grower grants credit—with terms specifying three days to thirty or more days—to the manufacturer, wholesaler, or distributor, who then grants credit to the downstream entity that sells its products to dispensaries, who retail the products to consumers. Or, a grower might grant credit directly to a retailer. Growers, in turn, will be extended credit by their suppliers: lighting companies, soil providers, packaging providers, etc. Once a company extends credit, it will need to manage accounts receivable.
In conclusion
Once federal banking regulations change and companies serving the cannabis market gain the same financial resources available to the rest of corporate America, entrepreneurs will need to implement formal credit policies that allow them to manage and grow revenue in a trade credit environment. Establishing the controls necessary to operate when credit and accounts receivable are commonplace will set companies on the road to even greater profitability.
Sam Fensterstock is the SVP of Business Development at AG Adjustments, a leading provider of 3rd party commercial collection services. Sam has spent his entire business career as an entrepreneur and senior executive in the commercial credit & collection space. He has been a founder and played a key role in the dynamic growth of several leading niche commercial credit risk management companies and is considered an expert in the order to cash and credit and collection process. Prior to joining AG Adjustments, Sam was the Director of Business Development at PredictiveMetrics, a statistical based credit and collection scoring and modeling company that he helped grow and sell to SunGard (FIS) in 2011. Sam can be reached at samf@agaltd.com or 631-719-8096.
A Closer Look at the “Flurry” of Cannabis Legislation in Congress
by Michael Correia, NCIA Director of Government Relations
Last week, we saw Congress introduce a flurry of marijuana related legislation, with many aspects directly affecting the cannabis industry.
Taking the lead on bill introductions were cannabis champions Rep. Earl Blumenauer and Sen. Ron Wyden of Oregon, who introduced a series of bi-cameral, bi-partisan bills that they referred to collectively as the ‘Path to Marijuana Reform’. In addition, the cannabis industry gained a new Republican champion – Rep. Carlos Curbelo of Florida. Rep. Curbelo is a member of the Ways and Means committee and is an original co-sponsor of the new legislation that aims to fix 280E. Their goal was to pave the way for regulation of cannabis at the federal level, and provide certainty in the 50 states. In addition, Colorado Congressman Jared Polis introduced his own stand-alone regulation bill.
This legislation would repeal the tax penalty that singles out state-legal marijuana businesses and bars them from claiming deductions and tax credits. Because marijuana is classified as a Schedule I drug, cannabis dispensaries operating legally under state law are prohibited from deducting normal business expenses from their net income on federal tax returns. In fact, many dispensaries have been forced to pay between 50 and 70 percent of their net income to the federal government. The lead sponsor is Republican Congressman Carlos Curbelo from Florida, who sits on the House Ways and Means Committee, the Committee of jurisdiction on tax bills. NCIA has been lobbying on this bill for years and is happy to have the Congressman help us navigate this bill through Congress.
H.R. 1824/S. 780, the Responsibly Addressing the Marijuana Policy Gap Act of 2017:
Congressional advocates say this bill reduces the conflict between state and federal law, without legalizing cannabis at the federal level. An all-encompassing bill, this legislation contains numerous sections addressing cannabis reform. Section 101 amends the Controlled Substances Act to exempt any person acting in compliance with state laws law from criminal penalties. Sections 201-207 address the 280E provision; makes exemptions for marijuana advertisements; allows access to banking services; allows access to bankruptcy relief; and allows tribal entities to pursue cannabis reform with fear of federal penalties. Sections 301-306 allow expungement of criminal records for certain marijuana-related offenses; limits marijuana drug testing for federal employment; excludes marijuana misdemeanors offenses from federal financial aid; limits federal civil forfeiture of state compliant marijuana businesses; limits immigrant deportation for marijuana related activity; and excludes marijuana related activity for federally assisted housing. Sections 401-403 lowers barriers to federal medical research of marijuana; authorizes Veterans Affairs doctors to allow recommendations for medical marijuana; and allows Indian Health Services to allow recommendations for medical marijuana.
This legislation would effectively legalize marijuana at the federal level by de-scheduling, taxing, and regulating marijuana. If passed, the Attorney General would have 60 days to remove marijuana from the Controlled Substances Act, but would still prohibit the transport of marijuana into any state in which it was still illegal under state law. Because of marijuana’s removal from the Controlled Substances Act, 280E would no longer apply to state-legal cannabis operators. In addition, this legislation would allow for a federal excise tax on marijuana. An excise tax of 10 percent would be in effect for the first two years after enactment. The rate would increase to 15 percent in the third year, 20 percent in the fourth year, and 25 percent thereafter. In addition, a $1000 per year occupational tax would be levied on each marijuana production facility.
H.R. 1841, the Regulate Marijuana Like Alcohol Act:
This bill, introduced by Colorado Congressman Jared Polis, would eliminate the federal ban on marijuana and establish a regulatory system that enables that choose to allow the use of marijuana without interference from the federal government. 60 days after enactment, marijuana would be removed from the Controlled Substances Act, but does not apply to interstate commerce. It would remove oversight from the DEA and move it to the Bureau of Alcohol, Tobacco, Firearms and Explosives; and would regulate marijuana like alcohol. It would establish a permitting system stemming from an annual licensing fee on marijuana producers. Finally, it would establish standards for advertising marijuana and its products.
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With uncertainty still remaining related to potential Department of Justice enforcement, more and more advocates in Congress are coming out in support of our efforts. NCIA will continue pushing for reforms at the federal level and our friends on Capitol Hill won’t stop until your cannabis businesses are able to operate freely, like all other businesses.
NCIA member looking to help advance our issues on Capitol Hill should register for our 7th Annual Cannabis Industry Lobby Days coming up May 16 and 17 in Washington, D.C.
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My career at RoseRyan has mostly centered around the finance needs of fast-moving tech companies. That changed a couple of years ago after working with a cannabis biotech company and loving it. Around the same time, our consulting firm saw signs that recreational cannabis was headed for legalization in California, and it was then that we realized many cannabis companies of all sizes were going to need the kind of professional finance and accounting support that we offer.
Frankly, no. Let’s face it, when companies are starting out, their books are typically a mess, whether you’re talking about cannabis companies or companies in any other industry. Business leaders are typically not focused on their finance operations — they have so many other parts of the business to attend to, and we get that.
Gary Cohen, CEO, leads Cova’s charge into the legal cannabis space by guiding the vision, strategic development, ‘go to market’ plans and culture.
“Being forced to hire an armored truck just to pay taxes or provide payroll isn’t only a hassle – it’s also extremely dangerous,” says Harry Resin, who longs for the day when he can open a business checking account for his cannabis company, 
“So many more people keep coming to Lobby Days which is amazing to see,” said Karson Humiston, founder of 
There were many Congressional offices that were receptive to the efforts and positions of NCIA members during Lobby Days. Heather took a meeting with Sen. Bernie Sanders’ (I-VT) office, for example, and after leaving the meeting she felt that it went wonderfully, stating, “Senator Sanders is a proponent for the safe and regulated use of cannabis whether in the medical side or the adult use side, so it was a meeting that for us was an opportunity to tell Bernie and his staff how much we appreciate the hard work that he’s done, ask him what we can do as an industry to help them continue the progress that they’ve already made and learn more about where his focus is.” Sullivan is well-versed in the issues facing cannabis businesses today and knows many other officials are still in need of convincing.
Early next week, the House Rules Committee will hold a hearing to discuss amendments to the upcoming appropriations bill that will fund the government for FY2018. The Rules Committee is used by leadership to maintain control over the House floor, and is 
A credit application is the first step in gathering information about potential customers. Even if customers pay in cash, the day will come when that system changes, and getting information about accounts at the start of business relationship is key. The more you know about its debtors, the better. In addition, collecting credit information will make it easier to determine exactly how much credit to extend a customer.
Federal regulations force most companies operating in the cannabis space today to deal primarily in cash. If you look back at emerging industries, operating only in cash doesn’t foster an environment for growth. Think of it this way: in a cash environment, a company with $1,000 in cash can buy only $1,000 worth of goods, but in a trade credit environment, a company with $1,000 in cash and $2,000 in trade credit can buy $3,000 worth of goods. Potential income from retail sales has tripled.