Member Blog: Augmented Reality CBD, Cannabis Product Labels – Entertainment Paves Path to Education
by Gary Paulin, VP of Sales and Client Services at Lightning Labels
Everyone loves good, entertaining stories. In part, their value lies in information — and education — sticking with recipients long after the storytelling has ended.
There’s a correlation in this to the value of Augmented Reality (AR) CBD and cannabis labels — which provide a novel, entertaining way to capture and keep audience attention. Along the way, product-makers have an opportunity to provide credibility-enhancing education about products, trends, quality control, and the like.
More than ever, consumers want to feel their products protect them. Likewise, cannabis and CBD manufacturer reputation and revenues hinge on consumers feeling safe using their products, and clear about proper (and improper) uses.
Augmented Realitybrings interaction and product labeling together, using smart device apps, and even your smart phone’s camera to create an enhanced user experience. When viewers download a related smartphone app and point it at the product’s label, they can see an array of different options including videos, 2D/3D content, social media sharing options, and content that enables seeing how products appear in the real world. A web-based interaction can be launched using your phone’s camera – just open your camera app and point it toward a QR code. In either case, the AR experience is initiated, and interacting with brand labels this way is fun, interesting, and can be extremely educational.
In many ways, it’s like hearing and seeing a story. When connected to useful, practical educational information, AR can fully address common and compelling consumer concerns at a time when fears about safety and health are at an all-time high.
In turn, this can assist manufacturers looking to gain another competitive edge when it comes to consumer awareness, preference, and sentiment. This further strengthens the labels’ role as the front door to product marketing and sales.
TrendHunter.com, dedicated to trend identification, notes that AR is gaining popularity in a variety of industries, ranging from food and beverage to cannabis. Regarding labels, the site notes: “The food and beverage industry adopts augmented reality-based labels… The use of AR in food labels is on the rise, with brands using such technology to both engage and educate their customers on the products they’re considering, or have already purchased. Such items cater to consumers’ continued interest in gamification, and add an element of interactivity that tends to be limited in product packaging.”
TrendHunter.com continues: “Though consumers tend to go online and research the details pertaining to products they purchase, the amount of information to sort through can be overwhelming. Thus, having brands do some of the work in relation to product education allows consumers the freedom to purchase in-person. With tech-integrations into labeling and packaging, this process is streamlined for consumers.”
Specifically targeting cannabis, TrendHunter.com emphasizes: “Virtual and augmented reality enters the cannabis space… The merging of augmented and virtual realities with the cannabis industry is on the rise as brands look to offer immersive experiences for connoisseurs and beginners alike. These platforms offer benefits like virtual product libraries and augmented package engagement — prioritizing both informative and creative experiences for viewers… For novice consumers, being informed about this emerging space is crucial in order to alleviate some of the apprehension they feel when they’re considering consuming a substance that was once attached with stigma and misinformation.”
Here are some hands-on, straightforward ways that AR-powered cannabis and CBD product labels can engage and educate consumers:
Show products being manufactured, establishing quality controls, purity and other credibility-building examples along the way;
Relate customer stories and reviews endorsing products, benefits and efficacy;
Address claims and controversies within the industry or involving the company itself;
Document complete tracking of products from seed to shelf, proving authenticity and quality control;
Provide ways (and encouragement) for consumers to interact with a brand via AR;
Offer easy social media sharing options, so that individual consumers can become brand information hubs via their networks.
Gary Paulin is VP of Sales and Client Servicesat Lightning Labels, a Denver-based custom label printer that uses state-of-the-art printing technology to provide affordable, full-color custom labelsand custom stickers of all shapes and sizes. Contact: sales@lightninglabels.com; 800.544.6323 or 303.481.2304.
Commmittee Blog: NCIA’s Diversity, Equity, and Inclusion Committee Offers Critiques and Recommendations for Illinois Social Equity Dispensary Licensing Process
by NCIA’s Diversity, Equity, and Inclusion Committee
We are NCIA’s Diversity, Equity, and Inclusion Committee (DEIC), comprising experienced professionals representing a diverse range of backgrounds. In response to the early results of the Illinois Adult Use Dispensary application process, and with the interest of supporting Illinois’ Social Equity efforts, we felt compelled to reach out and offer our analysis and recommendations.
While the creation of the Social Equity Program in the Cannabis Regulation and Tax Act and Illinois Department of Financial and Professional Regulations (“IDFPR”) implementation of the licensing scheme was well-meaning and intentioned, the recent litany of lawsuits and outcry from advocacy groups following Illinois’ inaugural issuance of cannabis licenses indicates heavy criticism. As demonstrated thus far, the Social Equity Program appears limited in its ability to capture a sufficient representation of persons most harmed by the War on Drugs in Illinois in business licensure and ownership, or to generate the opportunities for restorative justice and building generational wealth for such persons as hoped.
Our intention with this letter is to state our express desire to lend the expertise and resources of NCIA’s DEIC to support Illinois legislators in crafting Illinois’ licensing and regulatory systems in a manner that reflects the Social Equity Program’s laudable mission of reducing barriers to cannabis business ownership, and establishing a legal cannabis industry that is equitable and accessible to those most harmed by the disparate enforcement of drug-related laws in Illinois. Furthermore, we hope to lend support to local organizations building toward that same goal, and to form a coalition as we all strive to rectify the harmful effects of prohibition and the War on Drugs.
At this time, and pending further collaboration with local officials, NCIA’s DEIC makes the following recommendations for your consideration. For further understanding of the analysis supporting these recommendations, please see the attached report.
For IDFPR to move forward with license scoring and issuance as soon as possible, we suggest the following:
Removing the required possession of premises and overhead to hold on to property (not required of dispensary applications and may bankrupt existing applicants awaiting results)
Ensuring oversight of KPMG (the 3rd-party firm hired by the State of Illinois to score the applications) by persons of color and social equity representatives
Allowing for a documented appeals process internally with KPMG results before issuing them to all applicants
Scrutinizing Operating Agreements in the rubric and gradient to ascertain and avoid predatory or straw-man agreements
Moving forward, reasonable transparency would include knowing what the makeup and process was for KPMG in making their first evaluations, and what the process will look like for the re-scoring to avoid conflicts of interest. Specifically, IDFPR can ensure transparency by making the following information public:
Evaluation Rubric
Composition of the Reviewers
Scoring Process and Determination of Grading
Frequency of KPMG Meetings
KPMG Public Relations Contact
Timeline of Events During the Scoring Process
Lessons Learned and Plan for Improvement on Future Scoring Rounds
For future rounds of applications, we offer these recommendations:
Pre-qualifying social equity applicants for state funding to ensure economic empowerment in the application process
Providing a path forward for those who are not (yet) qualified to operate a cannabis business, but are qualified as social equity applicants
Allowing for 100% Social Equity Applicant owned businesses to qualify for cannabis experience points without partnering with a multi-state operator (“MSO”)
Issuing delivery licenses for social equity operators
We also express our support for the recommendations made by the Cannabis Business Association of Illinois’ Minority Access Committee, in their October 5, 2020, letter to Governor Pritzker. (see here)
Finally, we appreciate the efforts taken by Governor Pritzker, the Illinois legislature, and IDFPR thus far to address disparities in the application process and commend Governor Pritzker for taking leadership on this important issue. Allowing this first generation of applicants to address deficiencies in their applications, as it was originally intended to allow them to do, offers another opportunity to enter the lottery system, which we recognize and appreciate.
Additionally, the commission of a disparity study is commendable and should prove helpful in understanding what went wrong and how to improve. If anything, we hope our expertise and professional experience will assist in this process and in the effort to improve upon the mistakes of the past to achieve a more diverse, inclusive, and socially equitable future.
Thank you for your time and attention to this matter. Please let us know if we can assist in any way.
Sincerely,
The National Cannabis Industry Association Diversity, Equity, and Inclusion Committee
Member Blog: Rolling Out Legal Cannabis in New Jersey – 15 Key Points from the Proposed Law
by Charles J. Messina, Esq. and Daniel Pierre, Esq. of Genova Burns LLC
Many are thrilled that the Garden State will finally allow recreational use of cannabis for adults aged 21 years and older. Before recreational use can become legal, however, we have to wait for Trenton to pass a law that will regulate New Jersey’s cannabis marketplace. Determined to get the ball rolling, Senators Nicholas Scutari and Stephen Sweeney recently introduced a 200+ page bill, S-21, to start the process for legalization. This article highlights major points from the bill you should know if you’re looking to join this emerging industry.
Is adult-use (recreational) of cannabis currently legal in New Jersey?
No. Although New Jersey voters approved the referendum that amended the State Constitution to legalize the recreational use of cannabis for adults age 21 years and older, recreational use is not legal until New Jersey lawmakers pass a bill that regulates recreational use of cannabis.
When will New Jersey lawmakers pass the enabling law?
It is uncertain when the enabling law will pass. But Senator Nicholas Scutari said he wants the bill to hopefully pass before the end of this month. Two days after the referendum passed in New Jersey, he and Senator Stephen Sweeney introduced Bill S-21 – “New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act.” If passed, the bill will legalize the personal use of cannabis for adults subject to regulation by the Cannabis Regulatory Commission.
What is the Cannabis Regulatory Commission (CRC)?
The CRC is a panel of five appointed individuals who will be responsible to oversee the development, regulation, and enforcement of use and sale of cannabis in New Jersey. The CRC will also implement the legislation that Governor Murphy will ultimately sign to legalize recreational use within the state.
Who are the CRC members?
As of today, only two appointees have been named – Dianna Houenou, who will serve as the CRC Chair, and Krista Nash as a member. Although we are still waiting for the remaining three members to be named, we know that Jeff Brown – the Assistant Commissioner of the Department of Health, who currently leads the medicinal marijuana program in New Jersey – has been tapped to become the first Executive Director of the CRC.
What are the CRC’s powers?
The CRC has the authority to, among other things, adopt, amend or repeal regulations that control the cannabis marketplace. It can also grant, refuse, suspend, revoke, cancel, or take actions otherwise limiting licenses or conditional licenses related to cannabis.
What are the different types of cannabis licenses contemplated in the proposed legislation?
Currently, there are six classes of licenses:
Class 1 Cannabis Grower license – permits growing, cultivation, or production of cannabis in New Jersey.
Class 2 Cannabis Processor license – permits manufacturing, preparing, and packaging of cannabis.
Class 3 Cannabis Wholesale license – permits the storage and sale of cannabis strictly for resale.
Class 4 Cannabis Distributor license – permits the intrastate transportation of cannabis in bulk.
Class 5 Cannabis Retailer license – permits the sale of cannabis directly to members of the public.
Class 6 Cannabis Delivery license – permits delivery of cannabis from a retailer to the public.
Also, the bill was recently amended to allow the CRC to create a new license category.
Can individuals or small businesses apply for any of the licenses?
Yes. Under the current version of the bill, at least 25% of the total number of licenses in each class are reserved solely for microbusinesses. “Microbusiness” is defined as a person or entity with business operations that employ no more than 10 employees. Reserving 25% of licenses for small businesses is intended to, among other things, prevent interstate megabrands from completely dominating the marketplace in New Jersey.
Are there any restrictions placed on microbusinesses?
Yes, in order to qualify as a microbusiness under the proposed legislation, you cannot process more than 1,000 cannabis plants each month, operate a cannabis establishment that occupies more than 2,500 square feet, or acquire more than 1,000 pounds of cannabis in dried form for retail, resale, or processing each month.
Can I personally grow cannabis from my house for personal use or retail?
No. There is currently no “home grow” component to the bill.
Can I hold two classes of licenses concurrently?
As currently written, there are certain restrictions with respect to holding two classes of licenses concurrently. In particular, once retail sales of cannabis begin, there is supposed to be an 18-month limitation on the number and classes of licenses any one licensee may hold. During this 18-month period, the current bill prohibits a licensed grower, processor, wholesaler, distributor, or delivery service licensee to also become a licensed retailer, and vice versa. Also, a grower or processor may only concurrently hold two licenses – either another grower or processor license – for now.
How do I apply for a license?
Not so fast…first, the remaining appointment of the CRC Commissioners needs to happen along with the promulgation of regulations by the CRC. Then at some point in 2021, an application round for licenses should be announced. Each application for an annual license to operate a cannabis business must be submitted to the CRC. A separate license or conditional license will be required for each location where a cannabis establishment seeks to operate (or for the location of each premises from which a cannabis distributor or delivery service seeks to operate). Renewal applications for another annual license may be filed up to 90 days prior to the expiration of the establishment’s, distributor’s, or delivery service’s license.
What should I be doing now to prepare for obtaining a license?
Too much to write in one paragraph! But, after forming your application team and getting your corporate formation ducks in a row, one of the first things you should be thinking about is location.
Does that mean municipal approval is required in order to open a cannabis business?
Good guess. The CRC will require proof of local support for the suitability of the location of your proposed cannabis business. There were 70+ municipalities that were intending to ban canna-businesses. This number is likely to drop as municipalities should be able to charge up to a 2% tax on cannabis sales, which can help plug the deficit gap related to the ongoing COVID-19 pandemic and further other social justice initiatives.
Speaking of taxes, how will cannabis be taxed once regulated?
According to the referendum, cannabis products would be subject to New Jersey’s sales tax (i.e., 6.625%), in addition to the potential local tax of up to 2%. As the bill is currently drafted, the sales tax revenue is supposed to be used to administer the cannabis program and reimburse police departments for training costs associated with enforcing the law. There may also be an additional tax imposed on cultivators, and that revenue would likely be directed to social equity initiatives.
Will the CRC prioritize applications based on location?
Yes. The CRC is supposed to prioritize applications on the basis of impact zones, for which past criminal marijuana enterprises contributed to higher concentrations of law enforcement activity, unemployment, and poverty. The bill defines an “impact zone” as any municipality that has a population of 120,000 residents and ranks in the top 40 percent of municipalities in New Jersey for cannabis related arrests.
Daniel Pierre is an Associate in Genova Burns’ Newark, NJ office and a member of the Cannabis and Labor Law Practice Groups. In addition to labor work, he likewise assists clients in the cannabis industry, from analyzing federal and state laws to ensure regulatory compliance for existing businesses to counseling entrepreneurs on licensing issues.
Charles J. Messina is a Partner at Genova Burns LLC and Co-Chairs the Franchise & Distribution, Agriculture and Cannabis Industry Groups. He teaches one of the region’s first Cannabis law school courses and devotes much of his practice to advising canna-businesses as well as litigating various types of matters including complex contract and commercial disputes, insurance and employment defense matters, trademark and franchise issues and professional liability, TCPA and shareholder derivative actions.
For over 30 years, Genova Burns has partnered with companies, businesses, trade associations, and government entities, from around the globe, on matters in New Jersey and the greater northeast corridor between New York City and Washington, D.C. We distinguish ourselves with unparalleled responsiveness and provide an array of exceptional legal services across multiple practice areas with the quality expected of big law, but absent the big law economics by embracing technology and offering out of the box problem-solving advice and pragmatic solutions.
Given Genova Burns’ significant experience representing clients in the cannabis, hemp and CBD industries from the earliest stages of development in the region, the firm is uniquely qualified to advise investors, cultivators, processors, distributors, retailers and ancillary businesses.
Video: Member Spotlight – HAL Extraction
NCIA recently visited with our members HAL Extraction based in Golden, Colorado. While social-distancing with the team there, we learned more about their extraction rooms, booth, and labs, and how operators can get their cannabis extraction production facility up and running. The company’s Chief Engineer, Josh Gladfelter, gave us a tour and demonstration of the capabilities of their product offerings, while Sales Manager Emma Byrnes explained how the company works with customers to find solutions to their specific needs. As explained by the company’s President, Patric Galvin, HAL Extraction is focused on leading the way for industry’s safety standards, helping facilities achieve compliance, and the longevity of our industry. Learn more and take a tour in this NCIA member video spotlight.
Member Blog: Five Reasons to Use a High-Speed Smart Safe for Your Cannabis Business
There are many challenges to running a successful cannabis business, including finding the correct product to sell, hiring and training qualified budtenders, dealing with state regulations, accepting cash payment, and depositing cash into the limited number of banks and credit unions that accept cannabis business. Although many economists and magazines believe cash is going away with the recent introduction of digital and app-style payment solutions, in the cannabis space, cash is king. Cash payment is really the only form of payment for many states except for the rare occasions an app can be used. The questions that have been asked for years are what does the cannabis industry do with the cash payments they receive, how is the cash counted and secured, and how can it be deposited into the business bank account?
Cannabis businesses are always looking for ways to effectively count cash and make deposits in their retail locations while simultaneously trying to lower labor cost, increase accountability and productivity, and reduce risk. Traditional deposit preparation methods have not drastically evolved in the last 50+ years. A budtender will pull their till from the drawer and count down to the starting till amount, leaving the remaining funds as the deposit. In addition, it is also common practice for businesses to incorporate dual authentication practices, essentially double counting, or counting in the presence of a witness to ensure the count is correct. While dual authentication can give the impression of good quality control and insurance, unfortunately, it raises the cost of counting the deposit inside the store by tying up at least two employees’ time and attention on trivial cash counting responsibilities. Granted the store manager is a salaried employee, but the downside is the store manager is managing for time to count cash instead of the daily sales, however, there is a much better, faster, and more accurate way to make deposits in the cannabis industry.
A high-speed smart safe is faster than counting by hand and a more secure way to deliver cash deposits to the select banks. The reason is, at the end of the night, the procedure of making a deposit at the bank location is a dangerous one and is why many organizations will have utilized the same type of dual authentication to drive to the bank to make the deposit in the night drop box. Again, there is an illusion of safety with having two people make a deposit in the night drop. Here are five of the many reasons to use a high-speed smart safe in a cannabis business:
Accountability:
The smart safe provides individual user accountability, by capturing critical transactional data: who is making a deposit, the date and time stamp of the transaction, and the total value of the deposit. Individual user accountability allows customers to abandon the need to deploy dual authentication practices, allowing managers to reallocate their time and attention towards revenue-building responsibilities: supervising employees, training employees, inventory, customer service, etc.
Remote Visibility:
An online dashboard provides detailed transaction statements, trend/behavior tracking potential, and simplified reconciliation reporting. Reports can be accessed online from any device, downloaded/exported, and shared across your network, which improves the efficiency of accounting and loss prevention departments. The online dashboard will have different reports ranging from daily deposit, transactional history for the day, and a monthly deposit report for easy reconciliation.
Deposit Accuracy:
Incorporated bill validators will count and authenticate each note before securing funds into their final depository, thus creating a closed-loop system-cash is deposited, not dispensed.
Security of Funds:
By incorporating drop policies that align with the placement of the cash management device, customers can achieve an efficient and secure deposit process, but also reduce unnecessary cash exposure that may accumulate within a till drawer or within the back office. Smart safes are designed to only allow the Cash In Transit Company to pick up all deposited cash thus reducing the risk of theft.
Provisional Credit:
Provisional Credit is an online credit to the business bank account prior to the removal and secondary validation of funds offsite. In conjunction with your banking relationship, a smart safe has the ability to transmit a daily electronic file to the bank where said bank will give credit on the day’s deposit.
With the proper smart safe in place, it will allow cannabis business owners to manage the cash deposits more efficiently and reduce risk inside the location, and to reduce lower/short deposits. The smart safe gives each owner the ability to log in to the online dashboard from any device connected to the internet and see all the transactions from all smart safes across all their cannabis locations. Just imagine having the ability to see all deposits and transaction history in one convenient place to allow for better transparency and reconciliation. With the CARES Act being introduced and voted on, if passed, it would afford for more banking partners and offer more options for the smart safe to send provisional credit to your bank.
Bobby Combs is National Account Executive at Kisan America Corporation. He has over 6 years of experience in the cash automation industry and utilizing previous experience to formulate best practices and redesign cash handling procedures to maximize efficiency and reduce risk and labor. Kisan provides cash management solutions through smart banknote deposit and sorting systems.
Member Blog: Risks and Values Right Under Your Feet – M&A Real Estate Considerations
by Mark Hefner, CEO of MGO Realty Advisors and Dustin Grizzle, MGO Tax Partner
In the cannabis and hemp industries, capturing the true value of real estate holdings in an M&A deal can be both elusive and central to the overall success of the transaction. Difficult-to-acquire licenses and permits are essential for operating, which often drives up the “ticket price” of property, ignoring operational and market realities that suppress value in the long run. On the flip side, real estate holdings are sometimes considered “throw-ins” during a large M&A deal. These properties can hold risks and exposures, or, in many cases, are under-utilized and present an opportunity to uncover hidden value.
Both Acquirers and Target companies must take specific steps toward understanding the varied layers of risk and opportunity presented by real estate holdings. In the following, we will address some common scenarios and provide guidance on the best way to ensure fair value throughout an M&A deal.
Real estate as a starting point for enterprise value
Leaders of cannabis and hemp enterprises must understand that real estate should be a focus of the M&A process from the very beginning. All too often, c-suite executives are well-acquainted with detailed financial analyses for other parts of the business, but have a limited or out-of-date idea of their enterprise’s square footage, details of lease agreements, or comparable values in shifting real estate markets. Oftentimes it takes a major business event, like an M&A deal, to spur leadership to reexamine and understand real estate holdings and strategy. Regrettably, and all too often, principals come to that realization post-closing and realize they may have left money on the table.
In an M&A deal, the party that takes a proactive approach to real estate considerations gains an upper-hand in negotiations and calculating value. Real estate holdings can provide immediate opportunities for liquidity, cost-reduction, or revenue generation. At the same time, detailed due diligence can reveal redundant properties, costly debt obligations, unbreakable leases, and other red flags that would undermine value post-closing.
For both sides of the M&A transaction, real estate strategy and valuation should be a core consideration of the overall goals and value drivers of the deal. A direct path to this mindset is to place real estate holdings on the same level of importance as other assets that drive value – human capital, technology, intellectual property, etc. Ensuring that real estate strategy aligns with business goals and objectives will save considerable headaches and potential liabilities in the later stages of negotiating and closing the deal.
Qualify and confirm all real estate data
One of the harmful side-effects of a laissez-faire attitude toward real estate in M&A is that the entire deal can be structured around data that is simply inaccurate or incomplete. This inconsistency is not necessarily the result of an overt deception, but too often it is simply an oversight. Valuations can also be based upon pride and ego, without supporting market data.
Let’s visit a very common M&A scenario: The Target company has real estate data on file from when they purchased or leased the property (which may have been years ago), and that data says headquarters is 20,000 sq. ft. of office space. Perhaps they invested heavily into improvements like custom interiors that did nothing to add value to the real estate. The Target includes that number in the valuation process and the Acquirer assumes it is accurate. Following the deal, the Acquirer moves in and, in the worst case, realizes there is actually only 15,000 sq. ft. of useable space. Or it is equally common that the Acquirer learns the space is actually 25,000 sq. ft. Either way, value has been misrepresented or underreported. M&A deals involve a multitude of figures and calculations, and sometimes things are simply missed. But those small things can have a major impact on value and performance in the long run.
The only solution to this problem is to dedicate resources to qualifying and quantifying data related to real estate holdings. When preparing to sell, Target companies should review all assumptions – square footage, usage percentage, useful life, etc. – and conduct field measurements and physical condition assessments (“PCA’s”). This will help your team understand the value of your holdings and set realistic expectations, and perhaps just as importantly, it saves you from the embarrassment of providing inaccurate numbers exposed during Acquirer’s due diligence—and getting re-traded on price and terms. That reputation will ripple through the marketplace.
From the Acquirer’s side, the details of real estate holdings should come under the same level of scrutiny as financials, control environment, etc. Your due diligence team should commission its own field measurements and PCA, and also seek out market comparables to confirm appraisals. It is simply unsafe and unwise to assume the accuracy of any of these details. Performing your own assessments could reveal a solid basis to re-negotiate the M&A, and will help shape post-merger integration planning.
Tax analysis will reveal risks and opportunities
The maze of tax regimes and regulatory requirements cannabis and hemp operators navigate naturally creates opportunities to maximize efficiencies. This is particularly the case when it comes to enterprise restructuring to navigate the tax burden of 280E.
For example, it may be possible to establish a real estate holding company that is a distinct entity from any “plant-touching” operations. By restructuring the real estate holdings and contributing those assets to this new entity it may be possible to take advantage of additional tax benefits not afforded to the group if owned directly by the “plant-touching” entity. This all assumes a fair market rent is charged between the entities.
Recently, operators have looked to sale/leaseback transactions to help with cash flow needs and thus these types of transactions have gained prominence for cannabis and hemp operators. It is important that these transactions be carefully reviewed prior to execution to ensure they can maintain their tax status as a true sale and subsequent lease, instead of being considered a deferred financing transaction. If a Target company has a sale/leaseback deal established but under audit the facts and circumstances do not hold up, this could open up major tax liabilities for the Acquirer.
When entering into an M&A transaction, it is important that the Acquirer look at the historical and future aspects of the Target’s assets, including the real estate, to maximize efficiencies of these potentially separate operations. It is also equally important to review pre-established agreements/transactions to ensure the appropriate tax classification has been made and that the appropriate facts and circumstances that gave rise to the agreements/transactions have been documented and followed to limit any potential negative exposure in the future.
Contract small print could make or break a deal
An area of particular focus during due diligence should be a review, and close read, of the Target company’s existing property leases and other contracts. There are any number of clauses and agreements that seem harmless and inconsequential on the surface but can have disastrous effects in difficult situations. In many cases, the lease/contract of a property is more important than the details of the property itself. For example, if the non-negotiable rent on a retail location is too high (and scheduled to go higher), there may be no way to ever turn a profit.
The financial distress resulting from the COVID-19 pandemic has brought these issues to the forefront in the real estate industry. Rent payment and occupancy issues are shifting the fundamental economics of many property deals and contracts. If, for example, you are acquiring a commercial location that is under-utilized because of market demand or governmental mandate, you must confirm whether sub-leases or assignments are allowed at below the contract price. If not, you could be stuck with a costly, underperforming asset amid quickly shifting commercial real estate demand.
In many leases and contracts, there are Tenant Improvement Allowance conditions that require the landlord to fund certain property improvement projects. If utilizing these terms is part of the Acquirer’s plans, you may need to have frank and open conversations with landlords about whether the funds for these projects are still available, and if those contract obligations will be met. Details like these are often penned during times of financial comfort without consequences to the non-performing party, but a landlord struggling with cash flow may not have the capability to meet contract standards.
These are just a few examples from a multitude of potential real estate contract issues that can emerge. It is recommended to not only examine these contracts very closely, but have dedicated real estate industry experts perform independent assessments that account for broader social, economic, and market realities. That independent analysis will help your executive team formulate a real estate strategy that better aligns with core business objectives.
Dig deep to uncover real value
There are countless scenarios where issues related to real estate make or break an otherwise solid M&A transaction, whether before or after closing the deal. The only path forward is to treat real estate holdings with the same care and attention paid to the other asset classes driving the deal. The cannabis and hemp industries have recently endured micro-boom-and-bust cycles that have left many assets under-performing. As Target companies offload these assets, and Acquirers seek out good deals, both parties must undertake focused efforts to establish the fair value of complex real estate assets and obligations.
Mark Hefner, CEO and Shareholder of MGO Realty Advisors, is a real estate investment professional with over 30 years of experience supporting occupiers and investors as they navigate commercial real estate markets. Mark focuses on providing strategic advisory, transaction advisory, capital markets guidance, and ownership formation support for all types of commercial properties, both nationally and globally.
Dustin Grizzle, CPA, Tax Partner and Office Managing Partner of MGO’s Boca Raton, has over 15 years of experience providing tax planning and compliance services to real estate management and investment companies, manufacturing companies and high-net-
worth individuals. Dustin focuses his practice on tax compliance and real estate structuring, as well as tax consulting for entities with large inventories and manufacturing-related needs. He also manages tax programs involving investment funds, corporate structuring and IRS examination representation.
About MGO
One of the top 100 CPA firms in the country, MGO has a 30-year history of providing trusted accounting and advisory services to many leading public corporations, private companies and government agencies. The MGO team has developed a suite of proven solutions to help operators, regulators and institutional investors navigate the complexities of the cannabis and hemp industries.
About the Cannabis M&A Field Guide
This serialized multi-media project is an educational resource for cannabis and hemp operators and investors. It focuses on the evolving market conditions driving mergers and acquisitions, and provides first-person insight on best practices for strategy, structuring, valuation, and other topics behind successful M&A transactions.
Member Blog: Designing and Purchasing a Greenhouse with Rebates and Incentives in Mind
What if the highest performing cultivation facility isn’t the most expensive?
The highest producing cultivation facility is probably the most expensive, right? Highly productive and efficient cultivation facilities can be more financially accessible than you may think. Rebates and incentives provide business owners the option of turning otherwise high dollar projects into affordable, highly efficient grow operations.
Rebates/Incentives
An Incentive is a provision intended to motivate further growth, while a Rebate is a refund or discount that is returned to the client after the purchase has been made.
Rebates and incentives can be hard to classify because the process varies between utility providers. That being said, it is worth understanding the basics of how they work and how they can influence your overall construction budget.
Utility providers often have programs in place to incentivize the purchase of higher quality, and more efficient materials and equipment for your facility. These programs allow the utility to achieve their stated goals of energy efficiency, while providing power to more customers without having to increase their infrastructure/capacity. Because your efficient equipment is beneficial to the utility they may pass some of their savings on to you.
LED Lighting
LED lighting is the easiest place to start. Most utilities have an “efficient lighting program”, which is usually offered as an incentive. This means you submit your lighting plan and the lights you are going to use, and they compare your lighting layout and power needs (how much power your efficient LED plan will use) vs. a standard HID light, usually a double ended 1000 watt HPS bulb. Based on the equation they use, we have seen between 25% and 100% of the cost of the lighting being paid for by the utility. Often, this is paid upfront by the utility company (the client doesn’t have to pay full price and wait for a check). Once the facility is operational the utility will make sure the lights are being used as described.
Building Envelope and HVAC
Building envelope and HVAC equipment are also eligible for savings, but this usually comes in the form of a rebate. Normally, a utility will set a baseline for a greenhouse (i.e. all walls 8 mm polycarbonate, R-1.4 insulation value), and then compare the operational cost savings of a more efficient design vs. the baseline to calculate a rebate amount. We have seen rebate amounts between $100k – $750k for high efficiency sealed greenhouse facilities (up to a 15% reduction in costs on a new build).
The Design Process
It is important to know if rebates/incentives are available before beginning the design process for your cultivation facility. Understanding the entire process of design, build, and rebates/incentives when designing and budgeting a new cannabis grow can have a huge effect on capital expenditures. Sunlight grown cannabis with indoor environmental controls is emerging as the best way forward for cultivators looking to grow high-quality cannabis with lower operating costs, and rebates/incentives are a great way to help make the best option a more affordable one.
The most efficient option?
While sealed greenhouses tend to fall in the middle in terms of capital expenses, when compared to a newly built indoor grow (most expensive) and a vented greenhouse (least expensive), much of the equipment required to build a highly efficient sealed greenhouse can be expensive.
A highly insulated, well designed, sealed facility can be an expensive option because both the value of the structure and the systems within it are of the highest quality. An uninsulated sealed greenhouse, on the other hand, might cost less money upfront, owing to cheaper materials and possibly lower quality systems. This is where incentives/rebates can become a major cost-saving avenue for your bottom line, allowing you to build the best facility at a more affordable cost. Once built, the higher quality structure will continue to save money in operational costs–a win-win.
Conclusion
In mature cannabis markets, smokable flower continues to demand high prices, especially high-quality flower. Consumers and brokers have learned to recognize quality, and price per pound has adjusted accordingly. The ability to produce high-quality flower, at a low cost per pound, is the future of cannabis production.
Given the accessibility of rebates and incentives and the general trajectory of the market, we are living in a moment where the highest quality option may also be the most affordable.
Josh Holleb is co-founder, co-owner, and senior solutions architect at Ceres Greenhouse Solutions. Since starting at Ceres 7 years ago, Josh has created the cannabis division, bringing more than a decade of experience in both construction, cultivation, and dispensary management. Josh approaches his job with an interdisciplinary understanding of systems, architectural design, and problem-solving. His goal is to create a whole-systems approach to both greenhouse design and environmental controls, resulting in the most efficient systems and highest quality product. He has been featured in Marijuana Venture Magazine as one of the “40 under 40” rising stars in the cannabis industry in 2018.
Member Blog: Top 8 IT Concerns for the Cannabis Industry
by Sean Dawson, Director of IT Solutions at Office1
Integrating and measuring innovation for cannabis businesses can be daunting, mostly because cannabis has been considered illegal for decades. Luckily for the cannabis industry, the laws prohibiting the use of marijuana and marijuana products are tumbling down, and windows of opportunities are opening for people to integrate information technology with their cannabis businesses. As in other industries, information technology is shaping the cannabis industry as a frontier of opportunities for professionals in many exciting ways.
Despite being stereotyped and demonized for close to a century, the marijuana industry is swiftly reconstructing itself, thanks to cutting-edge technology that’s ensuring inventions, innovations, and progress. IT remains the ultimate lever for changing how people view and relate to the cannabis industry. Over the last few years, IT revamped the cannabis industry and transformed how marijuana is grown, processed, distributed, purchased, branded, and consumed.
Despite the remarkable progress, there are a few IT concerns for the cannabis industry. Here are the top 8 IT concerns for the emerging cannabis industry:
Automated Cultivation
Marijuana grow-boxes with fully automated grow technology for high-quality yields are a potential game-changer for the cannabis industry. A perfect example is a home-grow technology that allows people to discreetly plant a seedling or two in every corner of their houses. Every bit of the home-grow technology is highly guided and fully automated. This gives growers a deep personal satisfaction of growing their own marijuana without having to go through the taxing learning curve that other farmers have to endure to get the best quality yields. With this technology, you don’t even need an outdoor garden.
On a larger scale, there are tech-driven innovations in seed genetics and breeding as crucial aspects of cannabis cultivation. This technology modifies the DNA of cannabis to develop a cultivar with rich taste and more resistant to pests, diseases, and harsh elements of weather.
On the applications frontier, cannabis farmers now have access to customizable apps that allow them to configure cannabis cultivation to their geographical locations, soil texture, climate, and desired outcomes, among other considerations.
Automated cultivation is a growing concern for the cannabis industry as IT companies are striving to improve the cultivation technology even further, and growers are looking to leverage the best technology to gain more control over the quality and quantity of their yields.
Access Control
Cannabis dispensaries face the need to ramp up security within their premises. These dispensaries mostly deal with large cash transactions, which expose them to crime. These businesses are vulnerable to burglary, forgery, and robbery, necessitating advanced security options.
The need for improved security has led these dispensaries to incorporate stringent security options that effectively prevent malicious activity. For instance, to protect their crucial product, processing plants and growers utilize remote and cloud-based access control to the facilities.
Cannabis dispensaries normally take advantage of the flexibility that comes with current security systems to ensure that only authorized persons can access various areas within their facilities. To enhance security and access, these systems combine various security applications within one package, making them robust and efficient.
For instance, an access control system that grants keyless entry also combines with surveillance cameras, alarms, and the check-in systems to store a proper record of all personnel who visit specific areas within their premises. This ensures a safe work environment where the company maintains trust with their staff while simultaneously reducing liability. Remote access control also triggers rapid growth since it facilitates the management of many branches from a single point.
Automated Vending and Online Recommendation
With advances in computing and robotics, various companies have been experimenting with non-human point of sale vending technologies. The cannabis industry has not been left behind. Artificial intelligence has allowed companies to aggregate HIPAA compliant data thus allowing for the creation of platforms where doctors and patients to better predict treatment outcomes as well as managing analytic data points from seed to consumption. Enter, opportunity. Companies have now been utilizing this to innovate the way cannabis is being purchased. Through the creation of search engines designed off the AI data aggregation, consumers are now able to find the best available strains for their desired use case in both a medical and recreational use case.
Such technologies revolutionize the supply and delivery of the product as they help users make informed decisions regarding consumption methods and available strains, and therefore pivotal IT concerns for the cannabis industry.
Artificial Intelligence
Artificial intelligence (AI) has significantly transformed the way every industry does business, and the cannabis industry is not lagging far behind on this. The grade and strain of cannabis produced majorly depend on the environment in which it was grown. Artificial intelligence helps growers to enhance the plants’ genetic makeup and CBD/THC concentration to produce popular strains.
AI also helps in optimizing the supply chain, ensuring efficient and fast delivery of marijuana products. Companies are diligently exploring ways in which AI can help improve how quickly and efficiently the product can be moved, from the growers to the processors and, finally, the consumer.
For example, a California-based startup, Eaze, collects consumer data relating to consumption and delivery. The data is then processed, analyzed, and leveraged to help dispensaries keep track of demand and update their stock.
Other companies use artificial intelligence to forecast price changes, fluctuations in product supply, and to analyze trends within the cannabis Industry.
AI is, therefore, a critical concern for the cannabis Industry.
Retail, eCommerce, and Delivery
Retail, too, has benefited from advances in delivery technology. Today, you can order a product or service with the click of a button, pay for it remotely, and have it delivered at your doorstep. The cannabis industry is already in on these advances. In states where marijuana consumption is legal, there are apps you can use to order a marijuana product and expect a home delivery in minutes.
Marijuana dispensaries have also turned to technology to help educate the public on cannabis production and consumption. For instance, some dispensaries are adopting the use of augmented reality to guide consumers through the available strains and their effects on the human body. There are also tons of education programs that cover everything from how cannabis functions in the body, growing options, and the best strains for different types of consumers.
Customized Consumption
Technology has revolutionized how we consume the product. Unlike the previous years, when smoking was the most popular means of consumption, modern consumers have a wide range of options. These include skin patches, e-cigs, and dosed inhalers. These technologies have disrupted the cannabis industry, and are paving the way for even safer options.
No doubt, modern technology has led to the invention and discovery of safe practices in the consumption of marijuana. For instance, it is known that different consumers react differently to various methods of marijuana delivery. Today, it is not uncommon for a doctor to take a swab of saliva to determine the best strain and delivery method for a particular user.
Electricity Storage and Consumption Monitoring
Marijuana growers attest that one of the highest costs of marijuana production arises from the use of electricity. The use of LED lights and climate control are responsible for these power costs. One way to reduce these costs involves the use of storage batteries. Growers can buy electricity during off-peak times when power is cheaper, store it batteries and use it during peak times. This also calls for the use of energy monitoring solutions to determine power consumption trends within the cannabis farms.
Seed-To-Sale Technology
With the growth of the marijuana industry, producers and growers seek ways to improve efficiency in the cannabis production process, following the laid-out regulations and maximizing profit. Seed-to-sale technologies equip producers with all knowledge regarding their product supply chain. This way, marijuana growers function the same way as any legitimate pharmaceutical or distribution chain.
Seed-to-sale software allows for vertical integration, which means the grower can track the product through various phases of distribution (manufacturing, supply, and dispensing). Point of sale software can combine with the company accounting software to create a fully-fledged Enterprise Resource Planning system, making it easy to manage the product like any other business.
Seed-to-sale software also helps with the documentation of cannabis transactions, which helps with compliance management, inventory management, and analysis of consumption trends.
The Bottom Line with Cannabis and Technology
With the increased decriminalization of cannabis comes unprecedented growth, which attracts investors. This growth has brought with it some industry shifts, especially in technology. This article has explored various IT concerns that have spurred growth in the marijuana industry. Legalization has also helped debunk myths formerly associated with the cannabis industry, which has encouraged IT startups to create solutions for the marijuana supply chain. This way, growers and suppliers can focus on developing high-end products, while technology helps with compliance, bookkeeping, and product improvement.
The relationship between IT and marijuana growth will spur developments that propel it into a multi-billion-dollar industry in the coming decades.
Sean Dawson is the Director of IT Solutions at Office1. Office1’s mission is to innovate and progressively modernize the inefficient business landscape by providing a proactive, personalized, and eco-friendly office technology solution from planning to implementation and optimization. One solution from one company – Office1. Sean seeks to understand the heart of a challenge and then focuses on creating practical and timely solutions. He is an avid DIYer, gardener, and master house re-doer who loves spending his free time with his wife, four children, and six chickens.
Member Blog: Pivoting Your Cannabis Business During COVID-19
By Lindsey Griffith, Creative Content Specialist at ThrivePOP
Life has changed, and businesses are in panic mode. Consumer income suddenly becomes uncertain, and we begin to face our own economic vulnerability. Luckily for the cannabis industry, they were deemed as an “essential” business during the COVID-19 pandemic. And while this meant they were still excluded from federal funding, they were allowed to operate and service their consumers based upon differing state rules and regulations.
While some cannabis companies’ first instinct may be to cut costs to marketing, there are several reasons why that should not be the case. Not only does marketing need to continue for your cannabis business to stay thriving, but it also needs to be amped up. Here we’ll discuss some reasons why you should keep marketing efforts rolling and just how you can pivot your tactics during a pandemic.
Make The Most Of Your Time Online
On a normal day, the majority of the population is online. Now that many companies have transitioned their employees to work from home, or shut down altogether, even more people are spending time online. More people are on social media trying to interact with their clients and audience, and those that may have downtime are spending it on the web. COVID-19 brought sudden closing to in-person cannabis services across the globe and many businesses found themselves scrambling to get online. Social distancing practices suddenly transitioned daily activities to a completely digital life, so increasing your digital marketing efforts is a good way to continue to bring revenue to your business.
Now that your cannabis business may be limited to curbside, it is necessary to make your new purchasing process transparent online. Create a pickup process graphic for your website or pin directions to the top of your Facebook page. The easier you make it for your consumers to purchase your cannabinoids products during COVID-19, the better. Being online and consistently updating your content across the board is essential to keeping your cannabis business afloat.
Focus On eCommerce
During times like these, people are stuck inside – so naturally, everyone wants to shop online. By transitioning your cannabis sales to an online market, you will be able to maintain stability in uncertain times.eCommerce is a highly beneficial and successful way to keep your business active and making money during an economic crisis! It’s called retail therapy for a reason, right?
Luckily there are many resources to list your products online within the cannabis industry that expose you to a much larger audience than your website alone. Leaflymaximizes your cannabis or CBD business presence through targeted advertising on its website. It’s also equipped with an easy to use online ordering system that allows customers to easily order in advance for pickup at your location. Another resource often used as an eCommerce platform within the industry is Weedmaps. Equipped with a mobile application, Weedmapsalso makes it easy for consumers to easily search for cannabis brands and products near them. These are just a few of the resources available for you to legally list your products online.
While these external resources are extremely beneficial, all of these should work in conjunction with your own cannabis domain. Having your own domain and website for your business is essential to succeeding and staying on top of Google search results during COVID-19. Using search engine optimization and regularly adding new content to your website are just some of the ways to continually rank for related cannabis search terms. Don’t expect immediate results, however, as it often takes several weeks for Google to analyze and formally rank your website changes.
Build Your Email Marketing List
Now more than ever is a great time to build your client database. With the influx of people online and more time on their hands, it means that your offers can reach more people with the right marketing strategy. Setting up a marketing campaign with insider exclusives is an amazing way to keep people interested in your business and keep you at the forefront of their minds once things return to normal.
This can be done in the form of an email newsletter signup, social media contest, or even lead generation quizzes. Just make sure you’re following current web and social media contest rules and regulations. When creating these campaigns, consider what is valuable to your consumer, as this won’t be the same across all cannabis businesses. Do your consumers want to be educated? Are they interested in the latest products or strains in store? Does the majority of your business come from recreation or medicinal sales? Use what you know about your target audience to carefully curate exclusive offers that are unique to your brand.
Utilize All Of Social Media’s Tools
Adults are using social media up to 51% more than before the pandemic. Increasing your cannabis brand’s social media presence is key to staying in front of your audience during COVID-19. While you are currently not allowed to do any paid social media advertising (social media companies abide by federal law) there are many free tools available to grow your page organically. Making use of Instagram stories polls, questions, and countdowns are easy ways to give your audience a chance for them to interact with your page, therefore feeding into the algorithm.
Confused as to how that works? It’s actually pretty simple. Every time someone interacts with your Instagram story it signals to the algorithm that the user is engaged with your content. The more they interact, the more Instagram deems your content important to that user. Therefore, bumping you right to the top of their news feed!
Using micro-influencers on social media is also a very cost-effective way to market your cannabis business on social media. Their small circle of dedicated followers is more likely to convert into a customer for your business than a larger influencer account. Just make sure the partnership aligns and makes sense for both parties involved.
Reassessing Your Long-Term Strategy
How often do businesses get to press the reset button? If there is one silver lining during COVID-19, it’s the ability for businesses to adjust their marketing strategies. Now is the perfect time to develop a cannabis marketing plan that implements the standards of a “new” normal. When you do this you are able to reconsider your 4 P’s of marketing:
Product: Does my product serve my audience well during COVID-19? Place: Is my product or service easily accessible to my audience during COVID-19? Price: Can consumers afford my product or service during this economic crisis? Promotion: Will consumers respond to marketing tactics as they had before COVID-19?
Marketing can’t just be turned on and suddenly leads and conversions pour in. It’s a long road with twists and turns that lead you to your destination. Dropping marketing efforts turns that car around immediately, reversing all efforts to obtain leads and increase sales. This may be a difficult and confusing time in the cannabis industry, but remaining strong in your marketing strategy will keep your business stable and active during and after a crisis.
Moving forward, consider how your marketing campaigns can now enter your consumer’s psyche. Keep your campaigns focused on your cannabis brand and don’t look to gouge worried consumers. Let’s be ethical about all this, while also remembering how marketing and staying in front of your audience is important, pandemic or not. Eventually, things will return to normal, so being smart and socially conscious and putting your best marketing foot forward will carry your business through!
Lindsey Griffith is the Creative Content Specialist at ThrivePOP, a West Michigan based Digital Marketing Agency. As a copywriter, Lindsey has experience in creating and implementing content across several digital platforms including podcasts, webinars, blogs, and social media profiles. During her cannabis career, she has worked with several cannabis manufacturers on search engine optimization through blogging to drive traffic to their website and assist in organic social strategies to gain new followers. Lindsey received her Bachelor’s Degree in Marketing from Grand Valley State University and her work has been published across several cannabis industry platforms.
Member Blog: GMPs – A Way Ahead for Hemp and CBD Firms
The hemp industry is the marijuana industry’s half-sister. Both are variations of the plant cannabis sativa and both were made illegal in 1937 with the passing of The Marijuana Tax Act. Flash forward to the Agriculture Improvement Act of 2018 (known as the 2018 Farm Bill) that was signed into law by Congress on December 20, 2018. One year later, The USDA issued interim regulations that entitled Establishment of a Domestic Hemp Production Program for the cultivation of hemp on October 31, 2019. Both were huge steps forward for public access to hemp and hemp products. FDA legalized the growing of hemp in states with a state-mandated hemp program and removed hemp and its derivatives from Drug Enforcement Administration (DEA) Schedule I status and the U.S. Domestic Hemp Program aims to approve cultivation plans issued by states and Indian Tribes.
Even so, then FDA Commissioner Scott Gottlieb issued a statement hours after the signing of the Farm Bill reiterating that “Congress explicitly preserved the agency’s current authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act.”
Still today, two years later and counting, FDA only permits CBD products submitted as an Investigational New Drug (IND) Application as a pharmaceutical and there remains only one such accepted CBD product, Epidiolex, manufactured by G.W. Pharma. All other CBD products are illegal for interstate shipment.
In-state production and sales may be a different story, provided that state has a mandated hemp program. In those cases, provided state law is followed, production and sales are legal and protected, but the minute products cross state lines, they become the jurisdiction of the federal government and, more specifically, the FDA. At least 47 states have enacted legislation to establish hemp production programs or allow for hemp cultivation research.
Section 10113 of The 2018 Farm Bill states that (c) Nothing in this subtitle shall affect or modify:
(1) the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.);
(2) section 351 of the Public Health Service Act (42 U.S.C. 262); or
(3) the authority of the Commissioner of Food and Drugs and the Secretary of Health and Human Services- ‘‘(A) under- ‘‘(i) the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.); or ‘‘(ii) section 351 of the Public Health Service Act (42 U.S.C. 262); or ‘‘(B) to promulgate Federal regulations and guidelines that relate to the production of hemp under the Act described in subparagraph (A)(i) or the section described in subparagraph (A)(ii).”
The mission of the FDA is “to ensure the safety, effectiveness, and security of human and veterinary drugs, vaccines and other biological products for human use, and medical devices.” As such, FDA categorizes every product for sale in the U.S. which is either ingested or applied to a human or animals into categories. That means hemp-derived CBD products will have to lawfully fit into one of those categories, however, while there has been positive movement towards the legal sale of hemp products on the USDA cultivation side, the FDA has authority over foods and dietary supplements, and the FDA’s position is that the addition of hemp/CBD to a food or dietary supplement is “violative.” In a Consumer Update statement revised on November 25, 2019, the FDA clearly stated that “it cannot conclude that CBD is generally recognized as safe (GRAS) among qualified experts for its use in human or animal food.”
That being said, FDA has indicated it would be open to review of safety data for submission of a cannabinoid as Generally Recognized as Safe (GRAS) for Food or as a New Dietary Ingredient (NDI) in a supplement as the lack of any federal regulation runs the potential of putting people at risk. That has sent the industry scurrying to design and initiate studies in the hopes of demonstrating levels of safety that meet FDA’s satisfaction.
In the meantime, those currently operating in states where hemp manufacturing is legal, must ensure Good Manufacturing Practices (GMPs) are adhered to closely. Should the FDA ever allow hemp products with CBD to be sold in the future, a manufacturer’s ability to demonstrate understanding and compliance with GMPs will be critical. Each FDA regulated industry has its own set of GMPs for the development and implementation of quality systems.
21 CFR 117, Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Human Food
21 CFR 507, Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative Controls for Food for Animals
21 CFR 111, Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements
21 CFR 210, Current Good Manufacturing Practice in Manufacturing, Processing, Packing, or Holding of Drugs; General
21 CFR 211, Current Good Manufacturing Practice for Finished Pharmaceuticals
FDA Draft Guidance for Industry, Cosmetic Good Manufacturing Practice, June 2013
As the industry waits in the hopes that FDA will come on board with those states that have already legalized CBD’s use in products, it important to take the necessary steps to develop GMP protocols and quality systems as part of documented Standard Operating Procedures and record-keeping that those procedures are being followed, products are being tested and those tests are being validated.
Ensure as you begin to develop or strengthen your GMP programs that you do so with a full understanding of the requirements set forth in 21 CFR 111. Whether these programs are designed in-house or with the assistance of an outside consulting firm, ensure your GMPs are specific to your manufacturing procedures as opposed to a stock one-size-fits-all program. A reputable consulting firm with demonstrable expertise in FDA regulations and in helping to develop these GMPs is a good place to start, one that listens to your questions and concerns before providing you their stock answer. A good consulting firm can walk you through your unique processes.
Ensure your quality systems are robust and documented, including your demonstrations that your cGMPs are being followed.
Charlotte Peyton supports EAS Consulting Group CBD and hemp clients as well as that of dietary supplements and pharmaceuticals. As an independent consultant, she assists with projects ranging from startup through manufacturing and support. Her expertise includes quality, regulatory and management, method development, and method validation for FDA regulated drug, dietary supplement, and bioanalytical samples. She has extensive experience in writing validation protocols, reports, and SOPs and assists with implementation of stability programs and report writing for finished products.
EAS Consulting Group, a member of the Certified family of companies, is a global leader in regulatory solutions for industries regulated by FDA, USDA, and other federal and state agencies. Our network of over 150 independent advisors and consultants enables EAS to provide comprehensive consulting, training, and auditing services, ensuring proactive regulatory compliance for food, dietary supplements, pharmaceuticals, medical devices, cosmetics, tobacco, hemp, and CBD.
Committee Blog: Best Practices Guide – Allergen Labeling
Determining which edible to consume is an art all by itself. Making that choice when you suffer from food allergies often makes the decision all the more challenging.
Despite the continued federal illegality of cannabis, cannabis products are still obligated to abide by federal labeling requirements regarding the disclosure and identification of the presence of common allergens, including tree nuts (such as coconut and almonds), peanuts, fish, shellfish, dairy, soy, eggs, and gluten. Labels often do identify the presence of those ingredients and sometimes even the traces thereof. Although companies are seemingly committed to following federal requirements, there is still a continued absence of additional, more specific information that could help individuals with allergies make better-informed decisions when selecting their edibles.
A commitment to providing more information in labeling of common allergens not only helps consumers but also has the propensity to battle the stigma of cannabis as an underground and unregulated industry by embracing more advanced self-regulation and increased transparency. Additional information promotes transparency in the production and packaging processes, and provides valuable information to the discerning customer in addition to promoting better business practices. With roughly one in 20 adults allergic to peanuts or tree nuts, at least 5% of purchasers are directly impacted by the information related to the presence and management of nuts in a manufacturing facility.
In the marketplace today, common label designations include “may contain traces of,” “produced in a facility that also processes” or “produced on equipment that also processes.” Rarely is more information provided. Even though broad strokes disclosures satisfy federal requirements and limit legal liability, they do not do much to inform consumers suffering from allergies who could eat something produced with care, but cannot safely or comfortably consume food products that may contain traces of. With anxiety and paranoia, a potential consequence of cannabis overconsumption, the availability of more information about the presence of allergens on a label could possibly cure or temper an unwarranted freakout. More detailed information could even help avoid emergency room visits and the related trauma and anxiety from experiencing allergic reactions or the vestiges of one. No one enjoys the associated trauma and paranoia of hives in their mouth or wheezing while under the influence of an edible because they ate something that may contain traces of and actually did contain traces of the allergen.
The “may contain traces of” designation is good for the edible manufacturer at discharging potential liability, but it does not do much for consumers that are actually allergic to the items beyond sending the signal that if they consume the product, there is a possibly a legally identifiable amount present within the edible that could potentially trigger a severe allergic reaction. The language provides little information as to why there may be traces of the allergen. For the affected consumer, the business practices used to segregate common allergens or otherwise avoid cross-contamination or contact is what is critical for determining the likelihood and magnitude of the risk of any potential contamination, and therefore the risk presented by the consumption of an edible. This language, while good for insulation from liability, is not informative as to how the traces may have occurred and has the potential to be misleading and deter purchasers that would not be deterred if the label were more accurate at disclosing where in the production chain a potential trace of contamination could have occurred.
Manufacturers currently provide notice if there are “traces of,” or if equipment or a facility contains a common allergen, but they could go further. Four potentially more informative versions of “may contain traces of” or “made on the same equipment as other items that include…” or “made in the same facility as items that include” are:
Produced in a facility, but on separate equipment,
Produced on equipment, that processes INSERT ALLERGEN(S), but using best/reasonable business practices to segregate allergens in the production and storage process.
Produced on equipment, that processes INSERT ALLERGEN(S) where the facility produces products containing allergens on different days than products not containing INSERT ALLERGEN(S).
Produced in a facility that processes INSERT ALLERGEN(S) where the facility produces products containing allergens on different days than products not containing INSERT ALLERGEN(S). All production machinery is cleaned between the productions of different types of edible products.
Cannabis edibles product manufacturers could lead the charge on providing more informative allergen disclosures by promoting the use of more descriptive labeling practices. While such a move may cost fractions of a penny in ink and packaging real estate, the goodwill it could buy is invaluable. The loyalty of the allergy afflicted consumer (and the purchasers who care for or care about them) should not be understated. If a little extra print turns one in 20 customers into a lifetime brand patron, it is probably worth the rub.
Brandon Dorsky helps clients navigate the constantly evolving global marketplace in a variety of industries, providing strategic, seasoned counsel to facilitate growth, mitigate risk and seize opportunity in the cannabis, fashion, music, entertainment and media industries. Through a wealth of experience, contacts, enthusiasm, and commitment, clients receive carefully tailored legal and consulting services to accelerate their business’s success.
Member Blog: Drug Testing In Legal States – Corporate Policy vs. State Law
Currently, 33 states have legalized medical marijuana, and 11 others have given the green light to marijuana’s recreational use; however, the federal government still classifies any use of marijuana as illegal. This disparity creates a rift when employers go to test new employees for drugs.
Workplace drug testing began in the 1980s as part of former U.S. President Ronald Reagan’s “War on Drugs” campaign. At that time, employers wanted to ensure their workers were fit to do the job at hand. Since marijuana has become legalized in many states, employers in these states are unsure of new drug testing protocols; so are the states and legal systems themselves.
The resulting situation is a Catch-22.
Without testing, there would be more applicants for any given job and a larger pool of prospective workers. Therefore, employers would potentially get the strongest candidates. However, with testing, employers can assure they get drug-free employees who will be safe on the job.
But if marijuana is legal in some places and not others, who gets to decide where to draw the line?
Safety on the Job
Safety on any job is paramount, which requires workers who are alert and capable of completing the intricacies of the job.
According to Business News Daily, “The problem for employers is that impairment, because of marijuana, is usually much more difficult to detect and test for than alcohol. Unlike alcohol, it is very difficult for employers to determine if a positive drug test for marijuana is the result of drug usage during work or on non-work hours, so it is logistically simpler to just have an outright ban.”
Making the issue cut and dry is much easier on employers compared to making case-by-case decisions.
Additionally, any companies that accept federal money or hold contracts with the federal government will have to maintain drug testing protocols. In other business sectors, the line is not clear, which calls the legality of testing into question.
Legality of Testing
With the ever-changing state cannabis laws and the potential for cannabis to be legalized on the federal level, the nation is basically in a “trial and error” situation. Regardless, employers must keep current with these ever-changing circumstances to protect themselves and their employees.
The medical nature of marijuana usage further complicates the matter. Currently, 33 states issue medical marijuana cards, which permits users to use marijuana to treat medical issues. Business News Daily says, “Several states have specific laws protecting medical cannabis patients from employment discrimination. Typically, employers can require drug testing before employment and at random times, so long as there is no discrimination against medical marijuana users [who] are legally allowed cannabis for medicinal reasons.”
Besides the debate over medical marijuana cards, employers are stymied about what to do regarding recreational use as it pertains to the workplace. Since testing results can return positive weeks after the person smokes, there is really no way to tell if someone is a habitual user or it was a one-time event.
The states are divided. Currently, about 20 states will not allow discrimination in the workplace. But there is only one state that has gone so far as to say that recreational use of marijuana use is acceptable: Maine. Other states are starting to follow suit. Nevada law ensures that there can be no adverse outcomes for positive tests. And New York City will soon get rid of pre-employment testing altogether.
Other states are not so quick to change. For instance, workers in Illinois can still be disqualified as applicants or terminated as employees for a positive test. Currently, Illinois allows for the “good faith belief” that employees can consider workers under the influence if their speech or actions seem impaired.
Unfortunately, even the court systems do not agree. In some recent cases, the judge has sided with state rights, and in others, the federal appeal was victorious.
Moving forward, employees and employers need to continue the “wait and see” approach until federal and state employment laws catch up to the legalization of cannabis. For now, employers must determine their comfort levels with recreational marijuana use as it pertains to safety in the workplace.
Samantha Vanegas retains a MBA from the University of Florida Warrington College of Business. She works with the leaders of small start-up and growth-stage companies and non-profit organizations who seek temporary leadership to support growth and transitions. Whether for project-based work or as an interim manager, she is fabulous at supporting individuals and teams who are passionate about their work and need help bringing order to all the moving parts. She addresses common issues such as: how to build effective organizational infrastructure and systems; and, how to create and implement a strategy that will carry your business forward. She is a problem-solver who is able to envision the sum of the parts during and through transitions. She has a strong background in sales, operations, HR and marketing which elevates her expertise in assisting organizations with compliance intelligence and also with user, customer and employee experience surveys and solutions.
ath Power Consulting is an all-in-one resource for multi-modality survey and mystery shop research, competitive intelligence, compliance auditing, market analyses, employee training, and strategic consulting. Since 1997, we have helped our clients improve customer retention, build brand loyalty and advocacy, deepen employee engagement, measure compliance, maximize performance, and increase profitability – distinguishing them from their competition and giving them a commanding edge in the marketplace.
Committee Blog: What’s Up With Cannabis Standards?
by David Vaillencourt, The GMP Collective, NCIA Facility Design Committee
and Alena Rodriguez, Rm3 Labs, NCIA Scientific Advisory Committee
The cat is out of the bag despite the continued federal illegality of cannabis in the United States. A few years ago, the United States Pharmacopeial Convention (USP) recognized the need for standardization to address the safety and quality of cannabis used for medical purposes for the now estimated 3 million+ patients across the country. While the National Cannabis Industry Association (NCIA) does not develop standards and does not operate as a self-regulatory organization, it strongly supports the work being done by experienced standards-setting bodies. While NCIA lobbies for federal descheduling, the involvement of the USP and other organizations is another strong indicator of progress with respect to consumer and patient safety.
The USP is a nonprofit that humbly began with a small group of physicians on a brisk New Year’s Day in January of 1820. At the time, people would turn to their local apothecary for medications, where a druggist would mix together custom preparations from hand-collected plants and minerals. The types and quantities of these ingredients varied widely, with multiple names for the same medicine. Though sometimes not the fault of the physicians, it was not uncommon for the treatment to be worse than the disease. The USP rapidly evolved from a resource to an authority, when the importation of poor-quality medicines from Europe led to the Drug Importation Act of 1848. Tragic incidents of impurities and toxins in drugs over the years ultimately led to the 1938 Food, Drug and Cosmetic Act, in which Congress declared that certain medicines sold in the US must meet applicable USP quality standards. It should be noted that the USP included standards for cannabis preparations in the Pharmacopeia from 1851 until 1942.
Nearly 80 years later, the USP and several other internationally recognized groups are responding to the need to support the cannabis industry despite the quagmire of cannabis legality. Recently, the USP formed an expert panel of clinicians, scientists, and industry representatives from around the world resulting in a peer-reviewed article recently published in the Journal of Natural Products. The recommendations offered in this article (available here) provide a valuable foundation for the alignment of testing and quality attributes for cannabis flower. It is important to note that the USP published this information in a peer-reviewed article rather than a formal compendial monograph because of cannabis’ Schedule I status. Regardless, this article is another critical milestone towards standardization of the widely used plant, and it is only possible with support from individuals with knowledge of cannabis. Fortunately, there are established platforms that we as an industry can participate in and align with, known as Standards Development Organizations, or SDOs, that work closely with the USP to continue the advancement of our industry. In fact, many SDO efforts are referenced in the USP article.
ASTM International is one SDO that has responded favorably to industry and regulatory requests for assistance in standardizing cannabis. Founded in 1898 as the American Society for Testing and Materials, the group pioneered the standardization for the steel used to fabricate rails as frequent rail breaks across the fast-growing railroad industry plagued efficient transport of goods across the country between previously disconnected cities. Of the over 12,800 global standards published through ASTM’s rigorous consensus process, nearly one-third of them are codified within our federal regulations. ASTM Standards help ensure that the products in our lives can be depended on for safety, quality, and reliability.
The next time you wear a snowsport helmet, buy a crib for your child, use surgical gloves, pump gasoline, or get a new roof for your house, thank ASTM for creating the standards that help ensure that these items are safe. And lucky for us, now ASTM is focusing on cannabis standards.
In 2017, Committee D37 on Cannabis was formed, with subcommittees focused on developing test methods, cultivation best practices, quality assurance, processing and handling, security, and electronic devices. Today, over 800 members from 26 countries are actively contributing to the development of voluntary consensus standards. To date, more than a dozen voluntary consensus standards have been passed through the highly respected balloting process, providing specifications on water activity for cannabis flower, guidance on security plans, and many more. You can learn more about Committee D37 here and become a member here.
Another SDO is AOAC International, formerly known as the Association of Official Analytical Chemists. AOAC is a third-party, international association that establishes standard analytical methods and has been around since 1884. With the help of expert volunteers, AOAC ensures allOfficial Methods of Analysis (OMA) are highly scrutinized, scientifically sound, and defensible. OMA methods are recognized in the U.S. Code of Federal Regulations and are legally defensible in court globally.
AOAC created the Cannabis Analytical Science Program (CASP) to convene experts to discuss, develop, and validate cannabis testing standards. CASP is made up of five working groups: Microbiological Contaminants, Chemical Contaminants, Cannabinoids in Consumables, Training and Education, and Proficiency Testing. So far, CASP has published two First Action Official Methods for Cannabinoids in Cannabis sativa Dried Flowers and Oils (2018.10) and the Quantitation of Cannabinoids in Cannabis Dried Plant Materials, Concentrates and Oils (2018.11) and which are the first internationally recognized methods for potency in cannabis. They have also released several Standard Method Performance Requirements (SMPRs) that are developed through a voluntary consensus process, and prescribe the minimum analytical performance requirements for analytical methods during validation of the method. You can learn more about CASPhere and register to joinhere.
The work of USP, ASTM, AOAC, and others supports effective quality control of consumable products to promote public safety. These organizations create standards that are recognized by federal and state regulations across applicable consumable industries. Standards allow consumers to trust the products they buy have been subjected to thorough safety and quality controls that are the same no matter which state you buy the product in. Each organization has created an expert panel specifically for cannabis in order to help prevent uneven approaches to safety and quality. The efforts of USP, ASTM, AOAC, and AHPA directly relate toNCIA’s mission to promote the growth of a responsible and legitimate cannabis industry. With several thought leaders active both in NCIA and these organizations, it is imperative that moving forward we liaison with each other to ensure cannabis quality efforts are in alignment.
As NCIA says, “our industry is stronger, smarter, and more prosperous when we work together.”
Member Blog: How Third-Party Safety And Quality Audits Can Help The Cannabis Industry Self-Regulate And Avoid Mandatory Regulations
The disadvantages of receiving a third-party audit are apparent – it takes a lot of time to build a cannabis safety and quality program that meets audit requirements, and the costs of an audit can be relatively expensive. Additionally, if your company decides to use an external consultant to help develop your cannabis safety and quality program, it can add even more costs to the equation. So why bother getting a third-party audit at all if it is not mandatory? If the ethical response of “it’s the right thing to do” does not resonate, consider these more practical responses.
Legal Protection
Note that the lack of legal requirements for cannabis cultivators and manufacturers does not offer protection from legal action, and defending against litigation can be expensive even if a company prevails.
Brand Protection
If a consumer becomes ill (or worse) from ingesting or inhaling one of your company’s products, the negative public backlash and decline in consumer confidence can damage both your company’s bottom line and the industry as a whole.
Insurance Benefits
Insurance companies evaluate cannabis businesses based on their history and their current safety programs they have in place (e.g. GMPs, Recall Programs, Supplier Approval Programs, etc.). Whether or not a company has programs like these in place can influence the costs of their insurance. Additionally, third-party audits give cannabis businesses a verification record that their safety and quality programs are operating as intended. This verification record could help that company when dealing with insurance claims made from recalls or other adverse events.
Marketing Benefits
Enhance your company’s marketability by becoming certified to a third-party audit standard. For example, the new CSQ Standard lists all their certified locations on their website. This database creates a network of cannabis businesses who all meet industry requirements. Cannabis retailers will be able to search this public database and determine to do business with a cultivator or manufacturer based on their compliance with the CSQ Standards.
Self-Regulation
By proactively self-regulating, the cannabis industry can mitigate the possibility for high-profile recalls or outbreaks that might prompt regulators, such as the FDA, to establish mandatory and imposing regulations for the industry. Mandatory regulations could have a more burdensome effect and even be more costly than self-regulation with third-party audits.
Self-regulation is always preferable to mandatory regulation, and evidence of this is found in the alcohol industry’s self-regulation of marketing and advertising, as well as the video gaming industry’s self-regulation of video game ratings by the Entertainment Software Rating Board (ESRB). While third-party audits are not mandatory in every region, a voluntary and proactive approach that includes third-party auditing of cannabis cultivators and manufacturers will keep consumers safe and protect your company’s bottom line. All while avoiding adverse incidents that would initiate further scrutiny of the cannabis industry or prompt mandatory regulations.
To ensure that the industry is self-regulating properly, there are five proposed principles for self-regulation through third-party auditing.
A set of transparent and specific standards created by industry stakeholders that includes a public comment period.
External oversight through accreditation bodies, benchmarking organizations, and other external committees to ensure no disproportionate power or voting authority.
A public database in which individuals can search what companies are compliant with the requirements.
Transparent procedures for stakeholders to file complaints and provide feedback on the standards and their enforcement.
Periodic assessments and reviews to determine if the goals of the standards are being met.
In addition to setting sound principles for industry self-regulation, it is also important to highlight things that could potentially go wrong with self-regulation. The following three practices are often associated with the failure of a self-regulating system.
Weak standards that do not apply globally and permit unsafe practices.
The absence of transparency or weak oversight can undermine the objectives of the self-regulating system.
Industry leaders neglect to be part of the movement towards self-regulation.
For this reason, I urge industry leaders to sign a commitment to provide the safest and highest quality products possible and volunteer to be part of the movement of self-regulation of the cannabis industry through independent third-party audits.
Tyler Williams is the founder and Chief Technical Officer of Cannabis Safety & Quality (CSQ). Over the years, Tyler has diligently worked with various industry stakeholders and conducted sample audits on several cannabis cultivators and manufacturers to ensure the CSQ audit requirements meet the needs of this new and booming industry. Tyler currently sits on the Policy Council and the Cannabis Manufacturing Committee for the NCIA.
Before founding CSQ, Tyler was the Vice President of Operations for ASI, one of the leading food safety auditing, training, and consulting companies in the U.S. In this position Tyler was responsible for the certification process of over 3000+ audits annually and managed ASI’s employees and contracted auditors around the world. In addition to managing the day-to-day operations of ASI, Tyler also trained and consulted several different major food and beverage companies around the world to help improve their food safety practices.
In 2019, Tyler started a non-profit organization called Show Me Food Safety. This organization provides resources to small food manufacturers and growers in Missouri to help improve their food safety practices and get on the shelves of local grocery stores.
Allied Association Blog: Repetitive Motion Injuries and the Importance of Ergonomics in the Cannabis Industry
Repetitive motion injuries, also known as musculoskeletal disorders (MSD) are temporary or permanent injuries to muscles, nerves, ligaments, and tendons caused by performing the same motion over and over again. Common repetitive motion injuries are carpal tunnel syndrome and tendonitis. According to the Bureau of Labor Statistics in 2013, repetitive motion injuries cases accounted for 33% of all worker injury and illness cases.
These injuries can be mitigated or controlled through ergonomics. Ergonomics is defined as: “The scientific discipline concerned with the understanding of the interactions among humans and other elements of a system, and the profession that applies theory, principles, data, and methods to design in order to optimize human well-being and overall system performance.” Or more simply put: ‘Fitting the job to the person.’ The goal is to eliminate discomfort and risk of injury due to work. Ergonomics can prevent or reduce work-related MSDs and increase work efficiency.
Every industry and business has tasks that require repetitive motion, the cannabis industry and businesses are no exception. Cannabis operations have some motions and tasks that are similar to many industries, like lifting heavy objects, computer work, and standing for long periods of time. Cannabis operations also have some motions and tasks that are similar to other agricultural operations like pruning and harvesting.
But there is a task and motion in the cannabis industry that is uniquely its own: trimming. There are many different methods to marijuana trimming, including: pre-harvest trimming and pruning, wet trimming, dry trimming, and machine trimming. All trimming methods have the same goal: to manicure the flower (or bud) to its final product ready for the customer or patient. The process is a tedious one where the trimmer removes the leaves of the marijuana flower with scissors while leaving the calyx and resin (the good parts of the bud). The quality of smoke, vapor, and ultimately the consumer’s experience is affected by the quality of the trim job.
Traditionally, most marijuana trimming has been done seasonally around the harvest season. Most cannabis grown outdoors is harvested around October and it is common for cannabis farms to have ‘trim crews’ help them for a couple of months. As medical and adult-use laws expand, so do indoor and greenhouse operations. These operations are capable of ‘perpetual harvests’ meaning they can harvest more often; this has to do with the ability to control light and dark cycles. This means many operations can plan to harvest plants monthly, weekly, or daily if they choose. This has changed the demand for trimmers from largely seasonal you year-round demand, increasing the trimmers’ likelihood of repetitive motion injuries.
There is still a lot of confusion with workers in the industry about their rights. While many states have legalized marijuana, it is still federally illegal. Many workers do not know while it is federally illegal, they still have the same federal worker rights and protections every other U.S. worker has including the rights under the Occupation Safety and Health Act of 1972. Under this law, employers must provide a safe workplace, train employees in the hazards of the workplace, and inform the employees of the rights to report work-related injuries. Cannabis industry workers must also be covered by workers’ compensation if they become injured at work.
The lack of awareness about worker rights has likely led to the under-reporting of these injuries. As awareness of worker rights grows, the reporting workers’ compensation claims of these work-related MSD injuries will likely grow too. Pinnacol, Colorado’s largest workers compensation provider, reported that strains were the most common injury reported by cannabis workers in 2018. This should concern everyone in the industry. Cannabis businesses should heed the warning signs and keep their workers safe by developing their own internal ergonomic processes and practices for their operations.
California is in a unique position as when it comes to cannabis and ergonomics. California is the largest producer of cannabis and has more stringent ergonomic standards. If a California company has more than one employee report a repetitive motion injury, they are required to establish an ergonomic program to reduce repetitive motion injuries. These ergonomic programs require:
A worksite evaluation
Control of exposures which have caused the repetitive motion injury
Training of employees
Additionally employers in California are required to have an effective written Injury and Illness Prevention Program (IIPP), to comply with the California Code of Regulations, title 8, section 3203. The IIPP must include procedures to identify and correct health and safety hazards in the workplace and provide effective training to all employees so they can perform work safely.
The cannabis industry is still immature and searching for best practices of operations. While many workers and operators in the industry understand the need for ergonomic standards the reality is that ergonomic standards still need to be defined. This has been the goal of the National Cannabis Risk Management Association (NCRMA) and Dr. Chris Hughes with Atlas Performance Technologies, LLC. They have developed four courses to educate the industry on ergonomics, including: Introduction to Cannabis Ergonomics, Lift Like a Pro, Prune Like a Pro, and Trim Like a Pro. These courses are available through the NCRM Academy and can be found online here: https://ncrma.net/ncrmacademy/ These courses are designed for entry level cannabis workers to inform them of their rights, the ergonomic hazards, proper hazard controls, and best practices to stay safe and increase productivity.
Alex Hearding has an educational and professional background as a water and soil scientist and safety professional. He has legally cultivated marijuana as a medical caregiver and as a facility manager in a licensed greenhouse. He has experience starting marijuana businesses including license application, facility design, construction, operational development, and management. He currently provides services including occupational safety & health services and training and risk management for the cannabis industry.
When the COVID-19 pandemic started to ramp up in the U.S. last March and stay at home orders were being put in place, medical cannabis patients took notice.
I saw it firsthand with my wife who stocked up for three months, not knowing what she was in for and wanted to make sure she had her treatments, just in case dispensaries were closed down. She was not alone, it has been well documented that this stocking upsurge took place and sales increased dramatically over a few months.
But many of these businesses did not close during the shutdown and it was a big milestone that several state governments declared medical dispensaries essential. This was a big statement to make for an emerging new industry that has been saddled with controversy over the years.
Prior to COVID-19, the industry was already going through a reset in late 2019. The large players overextended themselves globally with huge capital investments in facilities and then oversupply hit the market, prices started to decline and the anticipated demand to pull CBD products did not materialize. Add COVID-19, and you have the perfect storm to amplify the reset button.
Consolidation is in the works — restructuring of management teams, companies closing doors because they were not strong enough to start with other factors too. This pushed these businesses over the edge.
As we have been slowly reopening the country, the cannabis industry has the potential to emerge stronger than ever. There might be fewer players, but the ones that have survived will be set for the next push of maturity of the marketplace.
States that do not currently have adult-use programs will most likely look at cannabis as a way to drive new tax revenue into the state to help offset the heavy losses during these several months of lockdown.
When these states do pull the trigger on adult-use, regulation and compliance will be a key issue. The current companies who have been using all the latest tracking platforms, ERP systems, and implementing cGMP standards will be in very good shape to meet the requirements and deliver authentic products that are high quality and safe to consume.
Consumers will want to know the origin of the materials being used to manufacture these products and demand transparency from the brands. New innovative technologies using unique molecular-based tags to apply to the flower, oils, isolates and edible products will help take the industry to a new level of scientific proof of authenticity offering forensic transparency across global supply chains.
Even in the face of a pandemic, cannabis is here to stay! Over 60% of the population is in favor of it for both medical and adult use. The science that has taken place over the last 20 years globally has articulated how the human body can take advantage of the cannabis plant in many ways. And for folks who want to use it as a recreational alternative, they should have the right to do so, of course with responsibility.
There is clear global demand, it still needs to be sorted out and that will happen over the course of the next couple of years as this emerging industry matures into a profitable market segment in the world’s economy.
It is an exciting time for cannabis and as we begin to focus on reopening business across the nation, we are eager to take advantage and to be a part of the opportunities that are ahead.
John Shearman, Vice President of Marketing and Cannabis Business Lead at Applied DNA Sciences, has over 30 years of deep enterprise and advertising agency experience across all marketing, sales and IT disciplines. John’s experience allows him to advise on structuring sound strategies that address business goals and objectives. His extensive technology background stems from working with several leading technology companies throughout his career. John spearheads Applied DNA Sciences Cannabis vertical leading the vision, strategy, and product development for this emerging market. John also oversees the marketing for the entire company driving the marketing strategy for its other core verticals.
Member Blog: How To Expand Or Renovate Your Cannabis Facility While Observing Social Distancing
Keeping employees safe is on everyone’s mind, as we continue to operate under social distancing protocols. Even as our communities open, we still need to be mindful of disease transmission when constructing any facility — especially cannabis industry real estate. Cannabis is an industry under endless scrutiny; the COVID-19 pandemic is an opportunity to show the world our true colors, as respectful and responsible business operators. The most visible way this responsibility shows up is in dispensaries, where across the U.S., cannabis companies have shown true innovation in shifting how they distribute product to customers — and continue to improve their facilities — while complying with social distancing requirements.
We can lead by example for other industries by continuing to build on the momentum we have, without sacrificing worker safety. Most cannabis companies are in ‘grow or die’ mode, understanding that opening new facilities and expanding operations is essential to survival in this rapidly evolving business.
Let me be clear: you don’t need to interrupt your forward progress, even if it may take slightly longer to deliver. From new licensees that have committed funds to build their first dispensary, to established cannabis companies with capital to expand operations, the good news is that construction activity is still going strong. We are currently renovating cannabis facilities in more than nine states, continuing to achieve operational milestones despite the necessary restrictions of social distancing measures.
Here are some ways cannabis companies can keep everyone working and shopping in your facility safe, while also making sure your building or renovation projects make progress:
1.Practice social distancing best practices on the job site.
Regardless of state-by-state differences in social distancing regulations, it simply makes sense to be ‘better safe than sorry’ right now. If you are renovating, construction workers will in most cases be working within your facility; this location means that they will have to comply with all the rules for your facility in general as well as with construction regulations and best practices. Your contractors should be clear about the social distancing practices they have put in place; you can cross-check to make sure that they are also in compliance with other guidelines and regulations you are required to follow within your facility.
2.Plan for scheduling that allows for less workers on-site at one time.
Generally speaking, placing workers six feet apart means you’ll need to have less workers per shift. When you can have fewer workers on-site at once, you’ll need to either extend your timeframe or make allowances for longer days. At our firm, we’ve implemented staggered shifts to keep the number of workers on a cannabis facility job site low; sometimes this means we arrive before the start of the day for the cannabis company employees then a second crew leaves long after the retail or cultivation workday is done.
3.Cleaning and disinfecting are essential; signage is key to ensuring success.
Special attention should be applied to more stringent disinfecting and cleaning processes needed during this pandemic. The cannabis company, the contractor, or both should ensure the availability and use of hand sanitizer. Additionally, signage will remind people to develop habits that keep everyone safe. Proper signage with construction site guidelines (e.g., signs urging trade partners employees cut employees to wash their hands, maintain six-feet distance, etc.). To ensure our teams are compliant, we’ve created a “safety bucket” that goes to all our job sites and is restocked regularly with updates to its safety guidelines binder; safety signs, first aid kit supplies, caution tape, blue tape, hand sanitizer, face masks and gloves. It also contains a fire extinguisher, so we are covering general safety as well as doing our best to contain the COVID-19 spread.
4.PPE is no longer optional.
Wearing protective face coverings (masks) and using gloves where they make sense is no longer a “nice to have.” Cities and states across the United States are enforcing social distancing rules and apparel requirements; job sites are at risk of being shut down if construction firms don’t comply. Additionally, since cannabis companies are so visible to many regulators, practicing over-compliance in this area will ensure that your overall compliance remains buttoned-up and inspection-ready.
5.Make as much progress working remotely as possible, before, and during onsite work.
It is clearly advisable to delineate between activities that can be done remotely versus on the job site. We’ve found that nearly the entire pre-construction process can take place via video conference calls. That includes conversations around budget, constructability, timeframe, and most design dialogues. Allowing the design and construction teams to collaborate together from the beginning encourages joint problem solving and streamlines communication throughout the project—an essential element because unusual circumstances like the pandemic nearly always require real-time troubleshooting.
Cannabis leaders’ and employees’ resourcefulness during the COVID-19 pandemic is a testament to the resiliency of this industry. While situations beyond the control of cannabis companies like a more conservative funding environment may damper capital outlay in the short-term, the continued strong demand for product even in times of great upheaval means the future is bright. Construction, like cannabis, is open for business and standing by to help support your long-term expansion goals.
Andy Poticha is principal at Cannabis Facility Construction. Since 2015, CFC has been involved in more than 30 cultivation facilities, processing centers, and dispensary projects in nine states, making them one of the longest-operating design-builders in the cannabis industry.
Now that COVID-19 shelter-in-place orders have eased restrictions for businesses to re-open across the country, employees and employers alike will have questions about returning to workplaces. Each city, county, and state will have its own specific requirements as to when and how you can re-open your business so you should be sure to check your own regional and municipal requirements. Whether you are getting ready to re-open or have been operating, we provide some FAQ’s to help facilitate a safe and compliant operation for your cannabis business in this new COVID-19 era.
Do my employees have to come in?
The short answer is yes, with caveats. You have the right to request that your employees return to work where the local rules allow for it. Please keep in mind that your re-opening must comply with local guidelines in order for you to require your employees to return to work. However, simply notifying them to return to work is only the start of the process. If they qualify for certain leaves, they can take that. Remember that the new Families First Coronavirus Response Act (FFCRA) will be effective until December 31, 2020. If they require accommodations, these need to be considered. Otherwise, if an employee has no special consideration and you need them in order to operate, you can take action if they refuse to return.
The practical reality is that many people are hesitant and afraid to return to work, especially without knowing how they will be protected. Most employers are being flexible about when and how they are bringing employees back to the workplace, especially if employees have been successful with working from home, have childcare issues, or are in a vulnerable population. If you are creating a workplace protection plan (see FAQ #2), consider sharing that plan in advance with your employees to ease their minds and make sure everyone knows what to do when they return to work.
Always remember, there is a difference between someone saying that they don’t want to return to work because they are generally afraid and someone saying specifically “I’m afraid to come back because I am immunocompromised.” And remember that an employee does not need to specifically ask for an accommodation. Simply advising that they are immunocompromised triggers your requirement to engage in the interactive process, which could result in modified hours, a special mask, moving a workspace, continued telecommuting, different job duties, or a leave of absence.
How can you keep employees safe?
With a pathogen as contagious and lethal as the coronavirus that causes COVID-19, employees will rightly want to know how they will be protected. To reassure employees, create a workplace protection plan that addresses the identification and isolation of sick employees, social distancing, workplace hygiene, and workplace cleaning. Share all safety steps that are being taken to maintain a safe work environment with your employees. Of course, each workplace is unique and will require different policies tailored to their specific sites.
General policies you should consider adopting include enforced safe distancing policies, temperature and/or daily question screenings, continued education on the importance of frequent hand-washing, cleaning and sanitizing of workspaces, minimal face touching, staying home when sick and self-monitoring of symptoms. Some examples to help maintain a safe worksite include having ample hand sanitizers available throughout the worksite, keeping office doors closed, wearing appropriate face coverings, marking off the 6-foot spacing with tape or other indicators, designating hallways and stairways as one-way, propping open doors to eliminate the need to touch handles, adding Plexiglas barriers at workspaces. Employers may also consider closing common areas or limiting the number of people who may use such spaces at a time.
Does the company have the right to ask about employee health history and take temperatures?
Yes. Employers are allowed to ask about coronavirus-related symptoms and take the temperatures of employees under guidance from the Equal Employment Opportunity Commission (EEOC), and some states now require it. The EEOC also permits employers to mandate that employees be tested for the virus before entering the workplace under certain circumstances, such as known exposure to someone already infected by the virus.
Testing should be administered in the least invasive way possible, like utilizing temperature guns or forehead temperatures. Testing should take place at the earliest possible opportunity at the workplace, to protect employees who have made it through already. Consider staggering start times, so that lines do not form. If a medical professional or person with medical training is available, have them administer the temperatures. If somebody with medical training is not available or onsite, the company should consider whether managers or HR employees may be trained to administer and read the test results.
If temperature taking at the workplace is mandated, the time spent being tested and waiting for a test should be considered part of the workday, and the process should be well thought out to eliminate crowding. If an employer requires the temperature be taken at home before coming in to work, the employer should consider allotting a few minutes on employees’ time cards for doing so. Consideration must also be given to providing notice to employees of the temperature screening process, data being collected and kept (if any) and the consequences for failing a screening. Please note that any data collected must be kept securely and separate from employees’ personnel files.
If an employee is sent home after screening, can employers require temperature testing or a doctor’s note to confirm they are no longer infected?
Yes. If someone has been sent home due to symptoms, administering a temperature test before allowing the employee to return to work is appropriate as the CDC recommends individuals be fever-free for at least 24 hours to ensure they have recovered. The CDC also recommends that anyone who recently had close contact with a person with COVID-19 should stay home for 14 days. The CDC, therefore, recommends that potentially exposed employees who do not have symptoms should remain home for 14 days. In such situations, please refer back to the FFCRA for requirements regarding paid leave.
Additionally, the EEOC has clarified that the ADA permits employers to require employees returning to work to provide a doctor’s note stating they are fit for duty because the inquiry would not be disability-related and/or because confirming that an employee is no longer contagious is a legitimate business necessity. The EEOC notes, however, that “doctors and other health care professionals may be too busy during and immediately after a pandemic outbreak to provide fitness-for-duty documentation. Therefore, new approaches may be necessary, such as reliance on local clinics to provide a form, a stamp, or an e-mail to certify that an individual does not have the pandemic virus.”
Can employers require employees to wear masks or other personal protective equipment?
Yes. The Centers for Disease Control and Prevention recommends the use of “cloth face coverings to slow the spread of the virus and help people who may have the virus and do not know it from transmitting it to others.” Many employers are making face coverings part of the work uniform, especially for jobs that require physical proximity. Some states and localities have required face coverings in order for businesses to re-open. Be sure to check your specific region for your own requirements. However, keep in mind that employers may be required to either provide employees with masks or other personal protective equipment or reimburse them for the expense if required to do their jobs.
Also consider whether or not to require your customers to wear masks. There may or may not be a local requirement to do so, but customers are an additional COVID-19 vector that should be considered when preparing for your employees to return. Just like employers may deny service to customers without a shirt or shoes, they can deny service to customers without a facemask.
What happens if an employee gets sick with COVID-19? What happens if someone in an employee’s family gets sick with COVID-19 and the employee is the caregiver?
Employers need to understand state laws and federal programs which have been enacted to deal with this pandemic. The FFCRA provides paid sick leave for people affected by COVID-19, as well as paid emergency family leave under certain circumstances including when the employee’s child care is unavailable for reasons relating to COVID-19 or when the employee must care for someone subject to a quarantine order or advised by a healthcare provider to self-quarantine. The United States Department of Labor has issued a helpful summary of FFCRA.
What if a co-worker gets sick?
Privacy rights must be maintained, but employers must also maintain a safe workplace and the law allows for them to do so. If temperature screening reveals a fever, that employee should be immediately sent home with return-to-work instructions. The employer should follow up with the employee regarding who they worked with, all the locations they worked and any other information to be able to notify all individuals who the employee came into contact with and comply with the most current local, state, and federal public health recommendations. If an employee calls in sick specifically with COVID-19, the employer should do the same. Actions may include closing the worksite, doing a deep cleaning, and/or requiring employees to work from home for a period of time. If deep cleaning is called for, the CDC recommends hiring professionals.
Under no circumstances should sick employees be identified by name. Notification to affected employees must not reveal any personal health-related information of an employee.
Member Blog: While You Are At Home (Part 2) – Time To Prepare For Achieving GMP Certification
In our last article, we discussed the benefits of Good Manufacturing Practices as a means to increase productivity, efficiency, and to drive accountability within an organization. With cannabis and hemp businesses negatively impacted by the ongoing COVID-19 pandemic, tight budgets are even tighter and existing room for errors are tighter than ever. As we begin to carefully rise out of the pandemic, failing to address recurring errors and inefficiencies will be catastrophic. In this follow up article, we dive into a few key systems that make up a GMP facility that you can get started on regardless of whether you are at home or on-site.
Internal (Self) Auditing
Even the most thorough and diligent people make mistakes or forget something from time to time. When you have a business that requires multiple people to make it run, the chances of a mistake increase exponentially. Left unchecked, this can result in catastrophic issues such as inventory reconciliation issues, customer dissatisfaction, product nonconformities, recalls, and even lawsuits. An internal audit program utilizes checklists to periodically conduct independent reviews of all operational areas at predefined intervals. Non-conformances are identified, and corrective action plans are implemented. This best practice is not only a GMP requirement but drives continuous improvement within your organization, ensuring:
List out all functional areas
Generate a matrix to establish the frequency of auditing for each functional area (we recommend every functional area be audited at least once per year – you can spread the auditing workload out over a calendar year rather than doing a full business audit once a year).
Conduct reviews of relevant procedures, documents, and records within those areas
Document the findings (including non-conformities)
Develop corrective action plans with the functional area manager to reconcile these non-conformities
Establish a timeline for closeout
Verify the effectiveness of the corrective action by conducting a spot audit 30-days later
Supplier Management
Did you encounter new challenges with the ability of your existing suppliers to provide you with the quality and timeliness of your raw materials, parts, or ingredients for your operation? Supplier management is a key component of a GMP program and ensures that you are able to deliver on your promises to the final client, be it the customer/patient, or another business in the supply chain. Items to include in a supplier management program include:
A Vendor Qualification Form
Quality Agreements
Right to Audit
Terms and conditions regarding product quality (specifications), and % of on-time performance
Documentation – upon delivery and retained over time
Review your existing contracts and supplier program. Don’t have a formal program in place? Get one started now based on existing relationships and their frameworks, and enjoy the benefits of this program as the economy slowly reopens.
Document Control
Do you have a list of all procedures, forms, and record books? Are they all stored in one binder in the Compliance office or do personnel have access via an electronic Document Management System. How do you ensure when a revision to a document is made that the old one is removed from circulation and not accidentally used by an employee? Document control is a pesky activity that many see as an administrative burden. However, discovering that a new formulation recipe was not being followed by a few employees because they were still using an outdated copy of the procedure for the last 3 months will justify any administrative burden and then some. Fortunately, being the year 2020, affordable electronic systems exist to streamline the process of effectively documenting and communicating all changes to relevant personnel, keeping your business compliant and operating efficiently.
Cleaning and Sanitation Validation
It is likely you increased your cleaning and sanitation regiment in light of COVID-19. How will you know when it is appropriate to scale back to pre-COVID regimens? Do you have any evidence that your prior cleaning and sanitation procedure was effective? Many companies are surprised to hear that their procedures are grossly ineffective. In one example, a company required personnel to wear Crocs in the ‘clean’ production areas. They also wore copious amounts of PPE (fresh lab gown and pants, hair nets, face shields) any time they went into a cultivation room. However, they suffered from significant pest outbreaks that seemed to spread from room-to-room with ease. They even had sticky mats outside of every room. The problem? The Crocs! A simple ATP test revealed bioburden levels that would make a college football port-o-potty seem clean. They were able to reduce their PPE levels by reorganizing workflows and periodically disinfecting the crocs, and their pest outbreaks disappeared within 4 weeks!
The cost – a few hundred dollars in testing for pathogens every week as part of their cleaning and sanitation program. By validating their results (running multiple tests and coming up with the same non-detect result) they were confident that their processes were effective (or as we call it in the GMP world – Validated).
Risk Management and Business Continuity
This final one is not an explicit GMP requirement, but, when built into your overall Quality System can provide you with quantifiable benefits. One of the other business disruptions that became evident in the COVID-19 era was how many companies did not have an effective Workplace Crisis Management Plan in place. Along with the GMP audit process it is recommended to review and update business continuity plans. What was learned during COVID-19? Where are gaps in the chain of communication, processes, and policies? How can we improve our training programs? Taking time to improve and adapt operating procedures will continue to build trust and effectiveness in your business.
Merril Gilbert, Co-Founder and CEO of Trace Trustand A True Dose™ and hGMP™ the first universal independent certification programs for dose accuracy in legal Cannabis and Hemp derived ingestible products. Always at the forefront of emerging trends on the future of food, technology, health and wellness, she leverages 25 years of experience of creative development, operations and investment for everything food and beverage. Current Chair of the NCIA Education Committee.
David Vaillencourt, CEO of The GMP Collective. David and his team at The GMP Collective bring decades of pharmaceutical and food industry best practices to cannabis and hemp. He holds a Master’s Degree, is a Certified Food Systems Auditor and brings a decade of experience in various governmental scientific work. David supports the industry in many ways, including serving as an Officer on ASTM International’s D37 Cannabis Standards Development Committee, participation in NCIA’s Facility Design Committee, and has also developed cannabis training content for college courses.
Member Blog: Cannabis Technology – Six Predictions for the Future of Cannabis Tech
by Barry Saik, Chief Executive Officer of Greenbits
Big changes are coming to the cannabis industry.
At least, that is the outlook shared by cannabis experts and lawmakers across the political spectrum. Even people who oppose federal-level legalization have to admit that the current status quo is unlikely to hold, and that popular opinion continues to sway towards the creation of a legitimate nationwide cannabis industry. Technology is playing a crucial role in connecting people inside and outside the confines of that industry.
How Cannabis Tech Will Evolve in 2020 and Beyond
There is considerable movement towards legalization in an increasing number of states. Surging demand has been keeping the cannabis industry afloat even in the worst-hit areas of the global Coronavirus pandemic. While federal-level legalization may be a long shot for the calendar year, there is good reason to believe that several new cannabis markets will open.
Many of today’s most exciting cannabis tech trends have already started gaining inertia. These movements are likely to continue picking up steam well into 2020 and beyond, even if federal-level initiatives prove unfruitful by the end of the year:
Expanded Payment Options
So far, cannabis has been a cash-only industry. Debit card transactions are gradually making their way into cannabis markets, thanks to cashless ATM solutions and a variety of online payment processors. The trend towards cashless payments is likely to continue, whether federally-backed banks support it or not.
If the federal government approves a bill that allows banks to fund and support compliant cannabis businesses, consumers will see a remarkable surge in industry development. Online ordering will likely become the new norm, powered by increasingly sophisticated e-commerce systems.
Without the support of federally backed banks, the market is likely to rely on unicorn FinTech innovators who can find ways to sidestep federal stonewalling. Compliance and cash availability will be issues, but solutions similar to those already in place will nonetheless flourish thanks to steady demand.
Better, More Accurate Strain Profiles
Right now, cannabis experts rely on a broad range of ambiguous, anecdotal data to differentiate strain profiles and the experiences they offer. There is not enough hard data to offer a quantitative comparison between any two strains.
Terpene research is going to change this. These aromatic oils are responsible for the telltale smell unique to each strain, and they have been shown to contribute to each strain’s medicinal and psychoactive effects.
The availability of hard data will transform the way consumers categorize cannabis. The goal is to go beyond the “sativa vs. indica” distinction and tell consumers exactly what to expect from each strain on an individual basis. In time, this may lead to an entirely new system of categorization for cannabis products.
A New Spotlight On Consumer Convenience
Colorado has implemented cannabis hospitality licenses as of 2020, and cannabis legislators around the country are taking a close look at the effects of the new rule. California already has a few consumption-friendly public locations, but this is very much a brand-new field where cannabis legislation – and cannabis technology – have yet to fully intersect.
On a similar note, Colorado is following California, Nevada, Oregon, and Massachusetts in allowing for cannabis delivery. These simple regulatory changes will have effects that transform consumer expectations in the industry, and the trend is towards convenience.
Expect a new brand of cannabis entrepreneur fusing technology and cannabis culture in ways never before thought possible. People are going to develop solutions that help solidify cannabis culture’s place in the local environment, capitalizing on convenience to do so.
Operational Experts Will Become Highly Sought After Cannabis Executives
There are several high-profile companies making movements towards consolidating their multi-state presence. At the moment, this is made difficult by the fact that every state has a unique set of rules for its cannabis businesses to abide by. This makes economies of scale difficult to achieve.
Operational talent is the specific kind that these large-scale organizations are going to be looking for. Until now, many multi-state operators have been run primarily by finance-oriented executives. This provides a good basis for setting up and closing acquisitions, but it will fall on newly built operational teams to build compliant solutions for multi-state organizations.
Hemp Will Open the Door to Cannabis Agriculture
The 2018 Farm Bill has led to official, federal-level recognition of hemp products. While this has not resulted in a nationwide hemp craze, the participating states are expected to bring non-psychoactive marijuana cultivation to the forefront.
So far, the USDA has approved 2020 hemp applications in Washington, Wyoming, Georgia, Iowa, and Pennsylvania. There are also fifteen tribal plans under review. Increased attention to hemp will lead to an increased dedication of tech resources to the needs of hemp farmers – which are necessarily distinct from those of psychoactive cannabis cultivators.
Market Intelligence Will Take Center Stage
A handful of ancillary industries – from cultivation-friendly real estate specialists to cannabis law firms – are expected to grow around the burgeoning industry, but market intelligence is the one most experts are excited about.
Industry leaders in every state are looking for data on cannabis users. Sales data can help inform industry players on better, more efficient ways to use limited cultivation resources. Merchandising data can help dispensaries build lasting partnerships with non-cannabis brands. A wide array of new businesses will enter the cannabis market without necessarily being growers, processors, or dispensaries.
The ability to securely turn dispensary transaction data into readymade analytic insight will prove to be one of the most valuable assets a cannabis company can have. The fact that state regulation already requires dispensaries to gather and report transaction information means that, in many cases, half of the work is already done.
2020: The Year for Cannabis Tech
Technology has historically played a crucial role in achieving civic and social progress, which then informs newer technological initiatives. Cannabis technology is already helping regulators meet the demands stipulated by voters who want safe, legal access to marijuana products, and this trend is going to continue.
Barry Saik serves as Chief Executive Officer of Greenbits, a leading cannabis retail platform that empowers more than 1,200 cannabis retail locations across 13 states with a safer and smarter way to manage day-to-day operations and maximize store performance.
Barry leads all functions of the company, which processed $3.3 billion in legal cannabis transactions in 2019. Through its platform, Greenbits offers the full suite of services that cannabis retailers need – automated state-by-state compliance, point of sale, inventory control, and personalized insights – to enable owners, managers, and budtenders to run, protect, and grow businesses with ease.
A veteran of Silicon Valley start-ups and global tech companies, Barry brings a wealth of experience in scaling and leading integrated teams building software solutions that help small businesses grow.
Barry joined Greenbits as CEO in late 2019 after founding and running the SmartLine business at GoDaddy (NYSE: GDDY), a global company that helps entrepreneurs and businesses to be successful online. Centered around providing a second phone line that connects with a smartphone, the unit grew to $8 million in revenue in the first year under Barry’s leadership.
Before GoDaddy, Barry spent 15 years working in a variety of senior roles at Intuit (NASDAQ: INTU) and its marquis tax product, TurboTax, the leading software solution for business and personal tax filings. Early in his tenure, Barry led the founding team of TurboTax Online, which 40 million people used in 2019 to pay their U.S. taxes.
As a senior leader in TurboTax’s marketing department, Barry oversaw the creation of the company’s first television ad campaign, which resulted in a 12 percent spike in sales. He also led TurboTax’s engineering team, which is charged with programming the ever-evolving federal and state tax codes into the software, a centerpiece capability of the product.
Barry graduated from Stanford University with a B.S. in mechanical engineering and an A.B. in communications. He received an M.B.A. in marketing from the UCLA Anderson School of Management.
Greenbits Company Description
As the pioneering leader of regulated retail, Greenbits is the complete cannabis retail management platform. Founded in 2014, we empower 22,000 users in 1,200 retail locations across 13 states. As the market share leader, Greenbits rings $3.7 billion in sales annually, comprising one-third of all cannabis sales in adult-use states. With the largest and fastest-growing network of cannabis retailers, we serve the most locations, reach the most customers, process the most transactions, and ring the most sales in the industry, making Greenbits the best-selling and most trusted cannabis retail platform nationwide.
Greenbits provides smart management solutions that help cannabis retailers maximize performance and make better business decisions. Our robust retail platform – with automated state-by-state compliance, inventory control, and personalized insights – enables owners, managers, and budtenders to run, protect, and grow their businesses with ease. www.greenbits.com
After years of trial and error, the modern extraction equipment and standard operating procedures have removed a significant amount of risk from volatile solvent extraction processes. As more and more states are looking to adopt marijuana policies involving volatile solvent extractions, I wanted to share some insights about safety I have learned in my 5 years of working in and with various extraction labs. Some of this may seem intuitive and obvious, some of it may not.
Employee Safety
Employee safety is the most important facet of safety in an extraction operation. Your employees are your greatest variable, but also the things you want to protect the most. Loss of life or limb is no joke and can often contribute to significant fines, license suspension, or even a total shut down – not to mention the emotional strain an injury-inducing incident can put on everyone.
I like to simplify employee safety into two areas: preparedness and equipment. Although your employees are a large variable in your operation, proper training, protective equipment, and process expertise will keep them safe from all but the direst of situations. Proper training should cover equipment usage, company SOPs, and hazard responses. Hazard responses will include emergency exit strategies, process shutdown, flushing station use, and will generally cover what an employee should do if hazardous conditions become present. Consistent training for your entire team will ensure that employee groups can regulate each other – one employee may catch another employee doing something that violates a company code and can prevent further incidents from occurring.
Equipment, in this case, means the personal protective equipment, or PPE. All extraction processes involve pressure, chemicals, or moving machinery and can cause bodily harm to your employees. At a minimum, employees should habitually wear goggles, gloves, and closed-toed shoes. Given that there are chances for chemical spills and irritation from fine plant matter particles, long sleeves and pants are also recommended – most labs are providing lab coats for their employees to fulfill this need. It is generally advised that you, the employer, should make protective equipment accessible to your employees and not require them to provide their own equipment. If your extraction processes involve hydrocarbons, make sure employees are aware of static build-up from their clothes. It is important to note that PPE generally doubles to prevent foreign materials from contaminating your product – hair and beard nets will provide added protection.
Equipment Safety
I like to consider equipment safety as an extension of employee safety because equipment failure or incident can typically be directly attributed to misuse by employees. Proper training is going to have the greatest impact on equipment safety, but installation, maintenance, and inspections will also dictate the longevity of your product and safe usage by employees. After selecting the proper unit for your operation, you should make sure that the unit is installed by a certified source. Most equipment manufacturers (EM) will offer training for you to have one of your employees be certified, or the EM will have a traveling resource that can visit your facility to ensure that install is done up to their standards. Once your unit has been installed, you need to have a 3rd party inspection done on your equipment and its operating area. One option is Pressure Safety Inspectors (PSI) – most local authorities will be happy to see a PSI stamp of approval and it will likely speed up your inspection process.
After initial equipment set up and approval, equipment safety largely boils down to maintenance and employee inspections. Most extraction units use components that will degrade over time: seals, gaskets, nuts and bolts, solvent lines and filters to name a few. You should implement a consistent replacement schedule, regardless of the appearance of these components, to ensure that they don’t become liabilities.
Beyond components, employees should also be performing regular integrity inspections of all unit vessels – if any damage is apparent, it is paramount that you contact the manufacturer to replace that component. Do not perform repairs on your own.
Facility Safety
Finally, we have facility safety. Luckily, modern technology has largely made facility safety autonomous – smart sensors detect solvents to ramp up airflow, fire suppression systems are automatically deployed, and control spaces can react efficiently to hazardous situations. However, because employees are still present, I do want to point out some areas that may be overlooked when it comes to facility safety.
First, signage. Signage can be anything from exit signs to hazardous material signs to reminders that PPE must be worn inside operating areas. Humans can be lulled into a sense of false security or forget important steps to operating safely and visual reminders go a long way to ensure that your employees are approaching their day to day tasks with the appropriate level of preparedness. Signs will also help employees efficiently vacate a space if there is a hazardous situation present – make sure your doors have panic bars and open outwards!
Another seemingly obvious, but often overlooked area of facility safety is the removal of ignitions sources from areas that contain hazardous materials. You must ensure that all equipment and components in a control area meet the electrical rating specified for that space. For example, a heat gun should never be used to expedite off-gassing of volatile solvents… it still happens more often than you would expect. Static build-up can occur because of certain textiles used in clothes along with plastic trash bags in plastic trash receptacles. Even tools should be spark-proof if they are going to be used in a control area.
Hopefully, some of the above information helps you ensure that your extraction processes are operating as safely as possible. As a parting thought, please listen to your employee’s feedback. If they feel unsafe or are questioning a process, do not write them off. They are on the front lines working in hazardous environments and will often see an issue before it becomes a catastrophe. As always, this is meant to be a guide, and you should always consult local authorities and follow regulations.
Xavier Jaillet has been a part of the cannabis industry since 2013 and worked in both businesses that are plant-touching and those that provide ancillary services to plant-touching operations. A brief stint in the mining, construction and transportation safety sector gave him a unique appreciation for safe operating practices and led him to HAL Extraction. HAL Extraction focuses on improving safety for manufacturing operations by designing smart, efficient, and effective extraction booths.
Webinar Recording: Managing Novel Risks During The COVID-19 Crisis (Part 2)
Watch this webinar recording to learn more about managing novel risks during the COVID-19 Crisis.
A conversation with industry legal and financial experts discussing how cannabis operators can mitigate the financial risks presented by coronavirus.
Get actionable advice and insights regarding how to manage your financial risk and avoid pitfalls.
Topics addressed include:
Managing finances in a business deemed “essential”.
Navigating the legal, financial nuances of assistance programs.
Federal and State Financial assistance programs.
What aspects of these programs can cannabis businesses utilize?
Legal ramifications and implications of applying for assistance.
CARES Act, upcoming changes to SAFE Banking, and what they mean to you.
Frequently misinterpreted language in 280E.
What coronavirus teaches us about the import of proactive financial risk management.
The panel:
Summer Jenkins, CLCS, Senior Product Manager of Cannasure Insurance Services, LLC (Moderator)
Christopher Davis, Executive Director of the International Cannabis Bar Association (INCBA)
Michelle Rutter Friberg, Deputy Director of Government Relations at NCIA
Kevin Haller, CPA, Principal of Akene Consulting LLC
Member Blog: Off The Backburner – Compliance During COVID-19
by Mark Slaugh, CEO and Co-Founder of iComply, LLC
Operational cannabis compliance has been a vital but often ignored part of many owners’ guides to success. With the hustle and bustle that is the ever-expanding nature of the cannabis business, most owners and operators want to believe they are compliant 100% of the time.
However, anyone who owns a cannabis business and is honest with themselves knows that to understand the constantly changing regulatory updates is a constant challenge. Often, the needs of the business outweigh the time it takes to assess the best ways to remain compliant. Too often, the distractions of growing the brand, networking, and conferences distract us from what’s happening with staff, procedures, and operations behind the scenes.
This has become alarmingly evident during COVID-19.
The pandemic began affecting how different operators in different States had to adjust various emergency procedures and restrictions on how cannabis could be bought and sold. From there, pandora’s compliance box released a torrent of issues to look at.
In our experience, 95% of the industry has a reactive approach to compliance management and will scramble to take time and pay expensive attorneys fees to dig them out of trouble once they are caught.
And what you resist, persists.
During COVID-19, owners are already making procedural adjustments to remain compliant and are staying at home for a change – which has allowed them and their teams more focus and less distraction by avoiding conferences, travel, and in-person meetings as much as possible.
What they are finding is that the compliance train has been off the tracks for a while.
Naturally, as the industry grows, so does the responsibility of mitigating liability and staying on top of the backburner projects in dealing with compliance. It is not the sexiest or most fun aspect of the industry (if you aren’t compliance nerds like us).
People tend to resist being honest about it, managing it appropriately, or holding others accountable until it’s too late.
COVID has at least provided some breathing room for owners and operators to put on their facemask and dust off their SOPs or untangle the strings around poor inventory management.
Some cannabis companies are asking themselves how they can use the boredom of COVID-19 (to some degree) and the extra time saved from travel, conferences, and meetings to re-examine their operational compliance infrastructure.
We are finding that owners in the cannabis industry are lacking a transparent cannabis compliance plan that can be easily adjusted to stay ahead of regulators, rules, and to mitigate product liability. They lack accurate employee training to specific procedures with accountability and wonder why turnover is so high. They are starting to realize that inventory, books and records, and daily compliance management are creating more risk than is tolerable for a tangible reward.
The word “decimation” comes from the Roman times and was considered a military punishment in which squads of 10 (deci) would draw stones from a bag. One black stone among the white ones meant beating that soldier to death by his fellows. While extreme, the lesson was an important one and is still relevant in the cannabis industry today.
Out of every inspection by the MED, in Colorado, around 10% of licensees were found in violation and administratively punished. Having come from a banking risk management background, it is shocking to see that level of risk be “ok” with most operators.
No other heavily regulated industry tolerates such a high level of risk. Cannabis, in fact, tolerates 10x more risk loss on average than is acceptable in banking (less than 1%).
Some of the biggest backburner projects in compliance coming to the forefront are:
SOPs and Employee Training Manuals
It is crucial to have compliant procedures that are accurate to current operations. One cannot effectively and proactively run a cannabis company without valid and accurate Standard Operating Procedures and related documents. They are essential.
What we find is that most established operators have to dust these SOPs off from whatever shelf they placed them on when they finally come around to looking at them.
Inventory and METRC
Another big problem area is inventory inaccuracies which require regular reconciliation and clean up. As we all know, once the snowball effect of inaccuracy happens, it simply gets more entangled and difficult over time.
During COVID-19, regulators are doing fewer in-person visits and are relying more on their ability to look at seed to sale tracking systems to identify potential non-compliance to conduct their inspections and request specific information from operators.
Books and Records
Most cannabis companies think SOPs, audits, and inventory are compliance management in a nutshell. The detailed accountability over files, logs, and forms often escapes their mind as soon as the file is saved or placed into the file cabinet.
Like dusting off SOPs, opening the file cabinet to ensure the accuracy of these documents can be best done during COVID-19 as well. Insight to this helps improve procedures and ensure accountability of staff members from visitor logs, to pesticide applications, incident reports, and manifests.
Staff Knowledge
For many of our medium to large clients, COVID-19 has affected their staff members. When one person is infected, many others may not want to come to work, and companies are forced to hire in additional labor to meet operational demand. If this hasn’t happened, consider you might want to be prepared for it as it takes away employees for a minimum of 2 to 4 weeks.
COVID-19 is causing a wide gap due to faster training requirements and creating more risk for non-compliance, product liability, and workplace safety without proper education, knowledge and accountability for staff.
Challenges like COVID-19, rule changes, and human nature are greatly mitigated and proactively managed when cannabis companies commit to taking compliance off the backburner and putting it at the forefront. Taking the time now to do so may be better than any other time for experienced operators to better prepare for “normalcy” when it returns.
An ounce of prevention is literally worth pounds of cure. And, during COVID-19, cannabis companies would do well to prevent the “decimation” of their very valuable licenses and operations by taking advantage of the extra time and energy to do the heavy lifting necessary to take compliance off the backburner.
Mark Slaugh, CEO and owner of iComply, works in the specialist sector of compliance for the medical, retail, and hemp industries and has over 12 years’ experience in cannabis industry development, consulting, and operational compliance and over 21 years’ experience in regulations and risk management.
Due to his extensive background and education, Mark knows what it takes to move markets forward at political, policy, and operational levels. He has developed small and large startups, improved existing operations, and has protected some of the top companies in the field.
iComply provides operational compliance services and validation of over 200 cultivation, manufacturing and processing, and dispensing facilities since 2011 and iComply consults for a variety of communities, organizations, and governments. Engaging in legacy projects over the long-term, iComply builds trusted relationships to ensure industry integrity, standards, regulations, and best practices are implemented and adhered to within organizations.
Committee Blog: Cannabis and COVID-19 – A Legal Perspective
As the COVID-19 pandemic continues to alter the day-to-day lives of humans across the globe in an unprecedented fashion, industries have made considerable adjustments to maintain their operations while protecting the health and safety of the workforce and the public. While some industries have had to cease operations to comply with “stay-at-home” orders, most states regulating cannabis have deemed cannabis essential, allowing cannabis businesses to continue operations during the COVID-19 quarantine period. The fact that cannabis was deemed essential in states such as California, Colorado, Illinois, and Michigan, demonstrates a major shift in public perception of cannabis and its utility. While challenges remain as they do for all industries, the cannabis industry appears poised to withstand the pandemic and to solidify its role in the economy.
Despite being deemed essential, adult-use cannabis sales have begun decreasing in states such as California, Colorado, and Nevada. Washington, however, reported record sales in April highlighting the diversity of legal markets throughout the United States. States that derive considerable sales for cannabis tourism like Nevada and California may see losses due to travel restrictions and mandatory self-quarantine periods. Although early sales reports suggest that the industry is equipped to weather this crisis, April sales only reflect the market one month into the pandemic that is likely to extend through the summer and potentially into next year. Thus, much remains unknown about the industry’s potential to stave off the impacts of an increasingly likely economic recession. Still, reports show that demand for cannabis remains strong and could potentially increase as the nation grapples with the significant financial and emotional duress associated with the pandemic.
States have taken proactive measures to ensure that patients and customers may safely access cannabis. States including California and Nevada have issued official guidance on best practices for cannabis businesses to observe to mitigate the spread of infection and preserve and promote public health. This guidance has largely prioritized the reduction of person-to-person interaction and adherence to heightened sanitation and hygiene protocols. Best practices for reducing person-to-person interaction include conducting sales by pick-up or delivery where possible, reducing the number of individuals allowed at the dispensary at any one time, and controlling the flow of visits to reduce the potential for exposure. Retailers have used space indicators like chalk, tape, and stanchions to demarcate 6-feet of separation between customers standing in line. Best practices for maximizing sanitation and hygiene include the promotion of contact-free systems such as tap-and-pay payment technology where possible, and the removal of handheld menus, tablets, and iPads, and aroma jars from dispensary surfaces. Retailers are advised to clean and sanitize commonly touched surfaces on a routine basis and to provide hand sanitizer to all employees and patrons in conspicuous locations to encourage frequent sanitization. Additionally, employers are required to monitor their employees’ health and hygiene practices. Employers should require any employer showing a COVID-19 related symptom to stay home from work.
While some businesses can rely on federal stimulus programs such as SBA loans for COVID-19 related relief, cannabis businesses cannot. Despite being equally harmed by the pandemic as other law-abiding, tax-paying small business operators, cannabis operators are ineligible for such funding because the cultivation and sale of cannabis remains illegal under federal law. While cannabis businesses are not currently eligible for federal relief programs, it appears that cannabis businesses may be eligible to defer the deposit and payment of their share of Social Security tax.
Nonetheless, as further proof of the growing bipartisan support for cannabis, multiple senators and congress members have requested that future COVID-19 relief packages include accessibility for cannabis businesses. One of the main reasons cited has been the cannabis industry being deemed “essential,” thereby allowing it to provide much-needed support to various states’ economies.
While the details of a post-COVID-19 world remain to be seen, one thing is clear – cannabis will continue to play a growing and important role in the U.S. economy.
Sahar Ayinehsazian is an attorney in Vicente Sederberg‘s Los Angeles office, where she focuses on corporate transactions, cannabis banking, and regulations. With her specialized knowledge, Sahar helped to establish and currently co-leads Vicente Sederberg’s Banking and Financial Services Department. As a member of the National Cannabis Industry Association’s Banking Access Committee, Sahar also works on strategy and educational advocacy to enable state-licensed businesses to obtain accounts at depository institutions.
Kelsey Middleton is a Regulatory Specialist in Vicente Sederberg’s Los Angeles office, where she focuses on licensing and regulatory compliance. Kelsey is responsible for assisting a dynamic range of cannabis clients in obtaining state and local cannabis licenses, permits and approvals, and navigating the complex and rapidly evolving regulatory landscape of the cannabis industry. She routinely helps clients prepare the requisite applications and documentation for state and local licensing and permits, and facilitates communications with cannabis industry regulators to promote efficiency and compliance throughout the licensing process.
Prior to joining VS, Kelsey interned at the Los Angeles Department of Cannabis Regulation where she analyzed proposed cannabis legislation and approaches for enhancing the efficacy of cannabis social equity programs.
Kelsey obtained her Juris Doctor from the UCLA School of Law, where she was the Co-Founder and Co-President of the Cannabis Law Association, and External Relations Chair of the Black Law Students Association.
Member Blog: IRC Section 471(c) of the TCJA May Mitigate the Curse of 280E for the Cannabis Industry
On March 30, 2020, the Treasury Inspector General for Tax Administration issued a report titled “The Growth of the Marijuana Industry Warrants Increased Tax Compliance Efforts and Additional Guidance.” The 53-page report discussed several different topics, including that the IRS should conduct more audits under Section 280E, and this discussion focuses on Section 471(c).
The report states that certain qualifying cannabis taxpayers, who would otherwise be subject to business expenses being disallowed under Section 280E, could potentially account for their inventory under Section 471(c) using a method that would classify most or all of their expenditures as inventoriable costs and avoid Section 280E’s disallowance of such expenditures. Accordingly, as all the costs would be capitalized into inventory, they would then reduce taxable income as the inventory was sold. In other words, expenditures previously disallowed under Section 280E would be part of the cost of goods sold and allowed as a reduction of gross receipts. There was no public comment from the IRS in the report on the potential that 471(c) may eliminate 280E.
Before continuing to provide our additional comments, it is important to mention the impact of Section 471(c) on Section 280E has not been reviewed by the Courts and the Inspector General also stated that necessary guidance addressing 471(c) is lacking from the IRS. As such, the impact cannot be stated in certain terms.
The curse of Section 280E on the cannabis industry cannot be overstated – some businesses actually end up paying more in tax than they make and Section 280E can turn an economic loss into a taxable gain. This seemingly unconstitutional result has been justified by the courts and IRS under a very old principle of taxation that “deductions are a matter of legislative grace.” New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) Legislative grace, according to these authorities, means the legislature has the power to deny all deductions, if they so choose, and it should be said that the limitation of such grace, under the 16th Amendment to the US Constitution, is that 280E cannot disallow costs of goods sold. With Section 471(c), however, legislative grace appears to be on the side of the cannabis industry because, as discussed below, Congress created Section 471(c) and it appears to allow inclusion of deductions into the cost of goods sold where they can’t be disallowed under Section 280E.
The Code states that Section 471(c) allows a small taxpayer, one with less than $25 million in revenues, who is not a tax shelter or public company to account for inventory according to their applicable financial statements, or absent applicable financial statements, according to the actual books and records of the taxpayer. For a qualifying business that doesn’t have applicable financial statements, if their books and records include deductions in COGS, then these deductions may not be subject to 280E.
Question #1 – What are applicable financial statements, what does it mean to have them, and if a taxpayer does not have applicable financials statements what are the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures?
It is our opinion that under IRC § 451(b)(3) if a taxpayer is required to issue audited financial statements in accordance with generally accepted accounting principles (GAAP) for credit purposes, to owners, or for any other nontax purpose, they have applicable financial statements. It would seem that “any other nontax purpose” would include audited GAAP statements required to be issued to state regulatory agencies. As such, because GAAP requires accounting for inventory in a manner similar to Section 471(a), taxpayers who have Applicable Financial Statements appear to be precluded from adding costs disallowed under Section 280E into COGS pursuant to Section 471(c). Of concern are states that require license holders to provide their licensing agency with audited financial statements. However, if the state doesn’t require GAAP financials, then the “Applicable Financial Statements” provision shouldn’t be a problem.
If the taxpayer does not have applicable financial statements, then they are allowed to account for inventory for tax purposes in the same way as they account for inventory on their internal books and records. Thus, their books and records would have to mirror their method of accounting for tax purposes.
Question #2 – Could a small cannabis company, who is not issuing applicable financial statements in accordance with GAAP and is subject to 280E, establish a method of accounting for inventory in which they consider all or most expenditures of the company to be inventoriable costs? If so, does characterizing these otherwise nondeductible costs as inventoriable costs change the nature of the expenditures from non-deductible business deductions to deductible costs of goods sold when the inventory is sold?
As noted above, there is currently no guidance from the IRS regarding this question and, we should assume, that the IRS will not acquiesce to the position that 471(c) eliminates 280E. So, let’s consider the arguments the IRS might make. First to consider is the Service’s conclusion in Chief Counsel Memorandum Number 201504011 regarding Sec 263A. Early on, cannabis taxpayers attempted to use Sec 263A to capitalize general and administrative costs, otherwise subject to 280E, into inventory and then deduct them as part of COGS. This does sound somewhat similar to the approach we are looking at under 471(c).
The IRS concluded in CCA 201504011 that Sec. 263A would not allow an expense disallowed under Section 280E to be added to COGS because of “flush language” added to Sec. 263A(a)(2) in a subsequent congressional amendment. The flush language states:
Any cost which (but for this subsection) could not be taken into account in computing taxable income for any taxable year shall not be treated as a cost described in this paragraph.
The U.S. Tax Court agreed with the Chief Counsel memo in several opinions including Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center v. Commissioner.
However, where this language was fatal to the cannabis industry’s attempt to use Section 263A to its benefit – it may help in the case of Section 471(c). It appears to have been necessary for the U.S. Congress to add the Flush Language to Section 263A to prevent the inclusion of otherwise disallowed expenses into COGS. There is no equivalent language added to Section 471(c) and so the argument is that in the absence of an equivalent provision, Section 471(c) can be used to include expenses disallowed under 280E into COGS where they can be used to reduce taxable income.
Another argument the IRS may make is that Treas. Reg. § 1.61-3(a) prevents the inclusion of deductions into cost of goods sold because the regulation states that Gross Income is determined without subtraction of “…selling expenses…” However, Section 1.61-3(a) is part of the Treasury Regs defining gross income and its reference to the non-inclusion of “selling expenses” is from the regulations under Section 471(a). Section 471(c) specifically states that Section 471(a) does not apply (which include the regulations) and a taxpayer’s method of accounting for inventory under Section 471(c) does not fail to accurately reflect income. And, Section 471(c) is a higher authority than the regulations. Thus, it appears that Section 471(c) trumps Treas. Reg. § 1.61-3(a).
Question #3 – Should a taxpayer, eligible to use 471(c) to account for inventory file their tax return taking positions regarding 471(c) as described in this article?
Every taxpayer is different, and accounting for inventory under Section 471(c) is not right for everyone in the cannabis industry. It is also important to understand that it may not work and for taxpayers who use the method to do so with caution and understanding. However, below is a list of issues to discuss with your tax professional:
What is your tolerance for risk and a legal dispute with the IRS? Such a dispute could be time-consuming and costly.
If 471(c) is proven not to eliminate 280E – how will you manage additional tax, interest, and possibly penalties?
Should the position be disclosed as part of your tax filing?
Does the entity have applicable financial statements?
Is the cannabis business a tax shelter?
How aggressive does management and ownership want to be regarding the position?
How will management accomplish the necessary accounting and records to support such a position?
In summary, 471 (c) has left the cannabis industry with several questions and definitive answers are probably not immediately available. License holders should work closely with their advisors as they navigate these questions. But, there is a possibility that Section 471(c) eliminates Section 280E for qualifying taxpayers. Cannabis businesses should take the necessary steps to understand it and protect their ability to benefit from Section 471(c) if it does work.
The Bridge West and GreenspoonMarder teams work tirelessly to understand the tax and accounting issues facing businesses in the cannabis industry and provide the best possible solutions to their clients.
To discuss any of the questions within this article please feel free to contact Calvin Shannon, Nick Richards or any of their team members.
Calvin Shannon is a Pricipal of Bridge West and has over 17 years of experience providing tax, audit, estate planning and trust services. Calvin is skilled at understanding client’s challenges and working with them to develop and implement innovative and unique solutions. Assists organizations to address the industry’s unique and ever-evolving issues. He enjoys having the opportunity to work with cannabis clients to understand their business needs, and to provide timely solutions
Nick Richards is a Partner in the Tax practice group at Greenspoon Marder LLP. He represents individuals and businesses in tax audits & trials, M&A, in managing tax debt, and he advises cannabis companies, owners and investors regarding tax and regulatory compliance matters. Mr. Richards has been a tax attorney for more than twenty years beginning his career with the IRS where he was a leading trial attorney, a Chief Counsel advisor, and a Special Assistant United States Attorney.
With his broad experience and understanding at all phases of the tax system, from reporting and assessment through appeals, court, and tax debt resolution, Mr. Richards achieves successful legal solutions tailored to his individual client’s needs. Mr. Richards also teaches tax attorneys and CPAs throughout the US and he is an Adjunct Professor of Law at the University of Denver, Graduate Tax Program, where he teaches State and Local Tax and Civil and Criminal Tax.
COVID-19 has altered everyone’s day to day life and has put a strain on the healthcare, food, distribution, insurance, and financial industries in ways we did not think possible just a few short months ago. It will be a slow process to get our lives and businesses moving forward. Having Good Manufacturing Processes (GMPs) in place will ensure that your business will rise from this stronger and more profitable, in addition to the trust and safety that it will display to customers.
The lifeblood of your organization starts and ends out on the production floor – whether that is in the greenhouse, the extraction and formulation room, or in packaging. This can be reduced to a series of processes with inputs and outputs. It should go without saying that without product moving through your processes, you have no output and thus no revenue.
Enter Good Manufacturing Practices (GMPs). Don’t confuse GMP as just the latest buzzword in the cannabis and hemp industry. It is a system of best practices that have proven themselves the world over through continuous improvement and refinement for several decades!
These best practices provide significant value to your employees, risk managers, investors, and customers as they enforce your company’s commitment to their safety. While you continue to keep your business afloat during these uncertain times, whether it is from the safety of your home or from the front lines if you are in a market that has recognized cannabis as the essential business NOW is the perfect time to review documents and take the next step to becoming GMP compliant.
Why GMPs for the Cannabis or Hemp Industry?
Good Manufacturing Practice (GMP) is a system for ensuring that products are consistently produced and controlled according to quality standards. It is designed to minimize the risks involved with any manufacturing production that cannot be eliminated through testing the final product.
GMP covers all aspects of production from the starting materials, premises, and equipment to the training and personal hygiene of staff. Detailed written procedures are essential for each process that could affect the quality and safety of your final product. These are complemented by systems to record and store data, to provide tangible proof that these procedures have been consistently followed – every time a product is made.
If your cultivation, extraction, manufacturing, laboratory, or distribution business is still operating you have probably had to modify your daily operating procedures. This may include implementing staggered schedules, limiting production runs, and providing frontline employees with revised hygiene guidelines and protective gear. Have you updated your standard operating procedures (SOPs) to reflect these changes?
Your SOPs are living breathing documents and are fundamental to every business, and a business built on Good Manufacturing Practices is no exception. To understand the value, let’s ask a few simple questions.
First, have any of these events happened within your business recently?
A change in PPE requirements
New or more stringent sanitation practices
Additional steps for end of day facility closing
New vendors or suppliers of ingredients (hand sanitizer? bleach?)
Employee leave requirements
Assuming the answer is yes to at least one of those questions (and if it isn’t, go back and read it again or call another colleague and ask them), your SOPs need to be updated.
Have you or someone in your organization reviewed your SOPs since any of those changes were made?
If you answered yes, how do you know that? Is there written evidence (a record or log) of this review somewhere?
For many of you, it is likely that someone somewhere performed some level of review, but whether it was documented in a clear traceable manner is another story.
Give Credit Where Credit is Due
It is common that within many organizations, the activities required to establish a robust Quality System, including GMPs largely exist, yet most likely not being documented. Unfortunately, the lack of documentation or poor documentation is nearly just as bad as not having done it in the first place. Why? Because an organization is a large fluid operation with many people moving in different directions. Without a record of changes, this change quickly gets lost in the shuffle.
By now it should be clear that the redundancies and miscommunications from a lack of documenting your activities can quickly multiply. By taking a few minutes to record everything properly provides tangible evidence of the activity (get credit for the work you did!) and will save time and money in the long run!
Now what?
Remember those questions earlier on in the article? Everywhere you had a “No”, go back and make it a “Yes”! And record it. At the end of the day, give yourself a pat on the back. You just conducted your first internal audit! You are well on your way to increasing your operational efficiency, and being able to show the world you care about product safety and quality by demonstrating Good Manufacturing Practices!
Stay tuned for our next post where we will dive deeper into the functional areas and programs that are the core components of a GMP system.
Co-Founder & CEO of TraceTrust and A True Dose™ and hGMP™ the first universal independent certification programs for dose accuracy in legal cannabis and hemp-derived ingestible products. Always at the forefront of emerging trends on the future of food, technology, health and wellness, she leverages 25 years of experience of creative development, operations and investment for everything food and beverage. Current Chair of the NCIA Education Committee.
David and his team at The GMP Collective bring decades of pharmaceutical and food industry best practices to cannabis and hemp. He holds a Master’s Degree, is a Certified Food Systems Auditor, and brings a decade of experience in various governmental scientific work. David supports the industry in many ways, including serving as an Officer on ASTM International’s D37 Cannabis Standards Development Committee, participation in NCIA’s Facility Design Committee, and has also developed cannabis training content for college courses.
Contact the authors to learn more about how your business may benefit from implementing GMPs.
Member Blog: Cannabis Dispensaries Are Essential Businesses – Transforming How Cannabis Businesses Operate
The COVID-19 pandemic has drastically changed how businesses operate and how people interact with one another. For many individuals, one of the greatest changes is living under “shelter-in-place” orders. The restrictions put in place have resulted in the closure of businesses that just a few weeks ago, many of us assumed would be open. The impact of COVID-19 on the cannabis industry has been dramatic, and the regulations and designations put in place over the past six weeks have altered the way cannabusinesses interact with their patients, as well as the way they are perceived as part of the larger healthcare conversation. The increasing adoption of technology solutions will continue to define the evolution of the industry long after the COVID-19 crisis has passed.
Dispensaries As Essential Businesses
Shelter-in-place has expanded across the country at a similar rate to the virus itself. When officials from states like California and Colorado issued these orders, cannabis dispensaries were initially not designated as an essential business. Due to public outcry, however, these initial orders were reversed. Dispensaries were classified essential and critical, joining other vital businesses like grocery stores, pharmacies, banks, and gas stations.
This distinction of dispensaries — medical, recreational, or both, depending on the state — as an essential business reflects how the cannabis industry and retailers are evolving to become a key part of the health infrastructure. Medical marijuana is a $5 billion industry with around 2,000 retailers serving more than two million patients nationwide. Among them are patients fighting cancer and using cannabis to manage their symptoms, veterans working to manage post-traumatic stress syndrome and those being treated for severe forms of epilepsy, Dravet syndrome, and Lennox-Gastaut syndrome. For patients like these, the cannabis industry plays an important role in their day-to-day health.
According to our research, cannabis sales have increased by 19.2% during the COVID-19 pandemic. Additionally, between March 11 and March 31, online ordering increased by 355%, delivery sales went up by 280% and pickup orders increased by 118%.
Modernizing the Cannabis Industry’s Way of Distribution
As demand continues to grow, cannabis dispensaries must adapt and adjust their operations in order to be compliant with the CDC’s guidelines for social distancing. For some business owners, this can be challenging, as historically, most cannabis dispensaries have sold and delivered product in-person and in-store with cash payments. In this “old way” of doing business, budtenders played an important role in helping customers, as they are trained to listen and discuss the most suitable products for each individual.
The reality of today’s world is forcing a shift in how businesses operate, moving from the traditional “in-person” model and embracing digital transformation for online menus, ordering, and delivery. Dispensary owners need to ask themselves: how with the aid of technology can they differentiate their products, and how can they engage and educate new and existing customers? As an essential business, how can cannabis dispensaries embrace the “new ways” of operating?
Through the integrated use of technology, business owners can keep up with the changing landscape to connect and engage with customers through:
Offering online video budtender consultations to replace in-person meetings
Providing online menus with robust product descriptions, improved merchandising, and bundled offerings around specific themes such as ‘sleep’ or ‘calming’
Developing targeted email and text messaging campaigns customized for individual customers to educate them on new product information
Guaranteeing secure, electronic payments
While industries across the board are embracing digital transformation, the cannabis industry now has an opportunity to fast-track its way there – and in time, this is what will enable cannabis business owners to thrive while protecting the health and safety of the community.
Nina Simosko serves as Chief Revenue Officer for Akerna, a global regulatory compliance technology company in the cannabis space. Akerna’s companies and investments also include MJ Freeway, Ample Organics, Last Call Analytics, Leaf Data Systems®, solo sciences, and ZolTrain.
With more than 20 years of technology industry experience, she has spearheaded strategic innovation initiatives for global Fortune 100 companies including Oracle, SAP, and most recently, NTT Group. Nina oversees both Akerna and MJ Freeway’s revenue generation streams, builds strategies to drive revenue growth, and plays a pivotal role in aligning revenue generation processes across the Akerna organization
Previously, Nina was President and CEO of NTT Innovation Institute Inc. (NTTi3), the prestigious Silicon Valley-based innovation center for NTT Group, one of the world’s largest ICT companies. Prior to NTT i3, Nina was responsible for leading the creation and execution of Nike Technology strategy, planning and operations world-wide. At SAP, she was the Senior Vice President of SAP’s Global Premier Customer Network (PCN) where she led both the PCN Center of Excellence and SAP’s Global Executive Advisory Board. During her eight-year tenure, she was a part of SAP’s Global Ecosystem & Partner Group which was charged with continuing to build and enable an open ecosystem of software, service and technology partners together with SAP’s communities of innovation.
Ms. Simosko currently sits on the Advisory board at Santa.io, AppOrchid and Reflektion and she has also been a member of the advisory boards at Appcelerator and Taulia.
The changes around ordering, delivery, payment, patient education and promotion are here to stay. With more than 70 integrated partners, MJ Platform offers clients the advanced technology solutions that are becoming increasingly important to the industry as we work through these challenging times, and that will define the future of cannabis in the months and years to come.
Member Blog: 5 Ways To Increase Operational Efficiency
by BriAnne Ramsay, CEO of RMCC, and Karen Mayberry, Marketing Director and Co-founder of Trym
In the evolving cannabis industry, companies are streamlining and optimizing their processes.
Labor is the highest expense in commercial cannabis activity across the supply chain, accounting for nearly half of production costs. For example, cannabis cultivation requires a skilled team to support production, harvesting, and processing, and packaging. As a retailer, it’s imperative to calculate labor cost per unit. When these costs aren’t accounted for, inefficiencies lead to lower margins.
Owners and managers are looking at their bottom line and strategizing on how to increase their operational efficiency. In this article, the folks behind Trym and RMCC, share their suggestions on doing just that.
Standard Operating Procedures
SOPs aren’t just for the operating license application, this is your company’s playbook. These procedures outline not what you intend to do, but what you are doing. If you change what you’re doing outside of that playbook; those SOPs need to reflect that.
How do you know your SOPs are being followed? Systems with consistent checks and balances! Data doesn’t lie!
Training and Ongoing Support
Many of us know from experience the cannabis industry has a higher employee turnover rate at 40%-60% within the first 2 months. One might infer it’s because, in a budding industry, we haven’t yet had the time or resources to focus on developing our “training departments” as large corporations have. Cannabis is busy jumping through hoops to satisfy external requirements and therefore we devote our resources to short term needs rather than investing in training infrastructures.
Maintaining a consistent, up-to-date learning strategy with executable trainingplans will help you decrease turnover – in all aspects of your operation. What experience does a new (or seasoned) employee have when coming on board or changing roles? Do they know what happens before they join the team? Day 1? Week 1? After a month? Complex roles may take up to 6 months or longer to acclimate to. If employees get frustrated early on they head out the door. What can you do to prevent this from happening?
Targeted training with ongoing support is crucial to maintain and improve efficiencies. The data shows that investing in your employees decreases turnover and in the long-term, increases your profit margins. According to the Association for Talent Development (ATD), companies that offer comprehensive training programs enjoy a 24% higher profit margin than those who spend less on training.
Communications Strategy
Today’s world demands quick, effortless distribution of information. One way to increase everyone’s efficiency is to enable that flow of information. Decrease the frequency and length of meetings. While important for decision making and collaboration, too many meetings correlates with lower labor efficiency.
Introduce a company-wide communication tool, like Slack, to leave the inbox for truly important emails while also opening up communication between departments.
Build an intranet with internal SOPs, workflow diagrams, important announcements, checklists, etc. Provide your employees with the tools and path to success. When communication flows across departments and seniority, you get a team structure that isn’t limited by bottlenecked decision making. Leadership is more accessible and the company can act quickly, achieving optimal results.
Create incentives for your team to perform great work. Recognize their accomplishments and offer support when necessary. Positive employee morale goes a long way.
Regular Process Reviews
Implement internal checks and balances such as audits, workflows and Key Performance Indicators analysis. Consistently reviewing production data will ensure the licensee identifies their operational gaps and can adapt to more efficient and compliant workflows.
Third-party audits are great resources to identify compliance risks that may not be found through internal audits.
Monthly or quarterly reviews of standard operating procedures are recommended to verify the documents accurately reflect the physical flows and the details reported to the state agency. Perhaps the state has made changes to their regulations and SOPs need to be modified?
Software Tools That Bring Value
Software has the power to automate certain processes and save labor time. When chosen, implemented and adopted correctly, it can greatly increase company efficiency. The first step in software evaluation is identifying the challenges your company faces and the ways in which software can help. Then, evaluate each software product on how well its features and services can support your efficiency goals.
In the cannabis industry, there are many ways to enlist software to optimize workflows. There are traditional software tools like Asana and Slack for project management and internal communication. And there are industry-specific tools like Trym for METRC reporting and cultivation management or Simplifya for compliance monitoring. Check out our piece on implementing Metrc solutions for your cannabis business if you’re in a Metrc state!
RMCC’s training courses, expert counsel, procedures, and documents help businesses achieve and maintain compliance. RMCC helps Operators and Technology companies excel in daily operations, implement seed-to-sale software, provide comprehensive training with on-site evaluations, and gap analysis. We help build the infrastructure of compliance operations through customized Standard Operating Procedures.
Karen Mayberry is the Marketing Director and Co-Founder at Trym.
Trym is farm management software custom-built for cannabis cultivators. Trym improves efficiency and consistency through environmental monitoring, customized task and batch management, and data analytics. Trym is currently integrated with Metrc in California and Oregon, and is used alongside compliance software in other states.
Member Blog: How Risk Management Can Heal Medical Marijuana Businesses
Envision managing the risk of a volatile, staggeringly lucrative, 100 percent federally illegal enterprise. Toss in ridiculously inconsistent federal, state and local regulations, insanely evolving technologies and efficiencies, and an industry-wide disinclination to “play by the rules.” Remember to remove the safety net, because neither cannabis businesses, nor their owners, are entitled to bankruptcy law protection.
However, when armed with decent risk management fundamentals, a marijuana-related business (“MRB”) can diminish most horrible outcomes, fortify the enterprise’s sustained growth, and maybe even get rich along the way.
Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical resources application which minimize, monitor, and control unfortunate events’ probability or impact.
Identifying Marijuana-Related Businesses’ Loss Exposure
The Comprehensive Drug Abuse Prevention and Control Act of 1970 prohibits marijuana’s manufacture, distribution, dispensation and possession and lists it next to heroin as a Schedule I controlled substance having “a high potential for abuse”. 21 U.S.C. §§ 801, Et. Seq (1970). Because of marijuana’s one hundred percent (100%) federal illegality, MRB’s are denied many standard “risk management tools” (like credit cards, bankruptcy law protection, and federal patents and trademarks), assembling a “risk management insurance, accounting, and legal advisory team” could prevent an insufficiently prepared MRB from foundering.
Risk management is the process of anticipating losses and developing a plan to survive them through: (1) identify each loss exposure (ex., being sued for a defective product); (2) evaluating each loss exposure’s frequency and severity; (3) weighing, then selecting, each exposure-managing-technique; (4) deploying exposure managing techniques; and (5) reviewing evaluating and improving risk-management plan.
An MRB’ “loss-causing-events universe” encompasses: (1) people (owners, investors, employees, customers and vendors); (2) property (buildings, equipment, crops, inventory, vehicles, data, cash, intellectual property); and (3) profits.
Although people are a MRB’ most valuable asset, and their welfare is the first priority, even the most safety-conscious businesses experience job-related injuries costing thousands in medical expenses and lost productivity. Through enacting safety plans and rigorous employee training, accidents’ frequency and severity can be minimized, employee health and welfare can be protected, and workers’ compensation insurance coverage premiums can be stabilized. Similarly, to prevent a dying investor’s ownership transferring to a less than cooperative relative, MRBs could obligate owners to execute buy-sell agreements requiring their survivors to sell decedent’s portion to the surviving partners.
Unlike people, damaged or destroyed property can be repaired and replaced and its “useful life” can be accurately anticipated and amortized. Unfortunately, due to federal prohibition, MRBs are denied many standard insurances (like crop or cash exceeding $25,000), federal trademark and patent protection, and banking and credit card services.
MRBs’ profits and valuation create the greatest vulnerability and regulatory fines and penalties, business interruption, and lawsuits impose the most perilous risk. Because they endure federal, state and local regulations, MRBs are vulnerable to fines and penalties from federal agencies, state agencies, and each municipality and borough in which they operate.
“Business interruption loss” is where an event halts an MRB’ operations like a wildfire’s soot and ash wiping out a grower’s crops immediately prior to harvest. Before the ensuing revenue-generating-grow-cycle is completed, employees, utilities and rent still require payment and, unless it has 6 months of cash to survive a revenue-less 180 day period, an MRB could get crushed.
Lawsuits range from a single plaintiff seeking damages to class actions in which an entire group of claimants seek compensation. Each year defective, faulty or misused products cause serious injuries and property damage. Although primarily seeking remuneration for personal injury, property damage, or economic harm, product liability claims may also seek punitive relief to punish the defendant and redress harms allegedly done to society. Defending litigation or settling claims can materially drain a company’s resources requiring additional regulatory requirement compliance, developing/ disseminating product warnings, instituting a product recall, deploying employee time to investigate/mitigate claims, investigating/testing products and assessing risk, and hiring expert consultants.
Bankruptcy’s Unattainable Protections
Because of marijuana’s one hundred percent (100%) federal illegality, and because bankruptcy can’t be used to facilitate federally illegal activity or administer assets that can’t be possessed or sold under federal law, bankruptcy protection is denied to both marijuana growers, processors, sellers, and transporters and the parties that own them.
Generally governed by federal law, called the “Bankruptcy Code” (“Code”), the bankruptcy system allows debtors to either dismiss or partially satisfy debts they are incapable of fully paying, and, upon filing, creates an “automatic stay” period during which creditors are prohibited from attempting to collect. Bankruptcy petitions are filed in a federal bankruptcy court governed by federal law, although state laws may determine how debtors’ property rights are affected (ex., validity of liens or exempting property from creditors).
Bankruptcy’s most common form is a Chapter 7 “liquidation” in which the court appoints a trustee to collect and sell debtors’ non-exempt property and distribute proceeds to creditors. Because most state allows debtors to keep essential property, Chapter 7s are usually “no asset” in which there are zero saleable assets to fund a distribution to creditors.
Bankruptcies allowing debtors to keep some or all of their property, reorganize and use future earnings to pay off creditors fall under Code Chapters 11, 12 or 13. Individual debtors usually file Chapter 13s, business entities file Chapter 11s, and Chapter 12 filings mirror Chapter 13 but are only available to “family farmers” and “family fisherman” and provide more debtor favorable terms.
Because the bankruptcy system cannot be used to facilitate illegal activity and the Code provide no mechanism to administer assets that cannot be legally possessed or sold under federal law, bankruptcy protection is unavailable to both Plant Touching MRBs and the parties that own them.
First, because the United States Trustee Program prohibits debtors with marijuana-derived-income-or-assets from proceeding, Plant Touching MRB’s Chapter 7 petitions are usually dismissed upon filing. April 26, 2017 Letter from Clifford J. White, Director, Executive Office for the United States Trustee to Chapter 7 and Chapter 13.
Second, even if a compliant state-licensed MRB debtor is involved, most bankruptcy courts dismiss cases involving marijuana-derived-income-or-assets. In re Arenas, 535 B.R. 845 (B.A.P. 10th Cir. 2015) (denial of marijuana grower/seller and legal dispensary landlord’s motion to convert to Chapter 13 and Chapter 7 dismissal because debtor is unable to propose feasible plan without violating federal law and trustee’s estate administration duties by selling debtors’ assets); In re Medpoint Management, LLC, 528 B.R. 178 (Bankr. Az. 2015) (dismissing “owner of intellectual property leased to marijuana products seller” due to “dual risk” of assets’ potential forfeiture and trustee’s CSA violation in administering estate).
This “bankruptcy protection denial” also may extend to Non Plant Touching MRBs. In re Way to Grow, Inc., (Bankr. D. Col., Dec. 14, 20l8 No. 18-14330)(because hydroponics equipment seller knew or had reason to believe that customers would use equipment to grow marijuana, bankruptcy dismissed because business deemed illegal under 21 U.S.C. §843(a)(7)).
2019 National Law Journal “Finance, Banking, & Capital Markets Trailblazer” award winner, Steve Schain chairs global cannabis law firm Hoban Law Group’s PA and New Jersey practice and chairs its Financial Services Group. With 17 offices and 52 lawyers, Hoban Law Group is the only practice 100% devoted to cannabis and hemp law. Admitted to practice in PA and New Jersey, Steve represents entities, governments, and individuals in litigation, regulation, compliance, preparing and submitting license applications, entity formation, and drafting legislation. A nationally recognized consumer finance litigation, banking law, and cannabis law expert, Steve is a The Legal Intelligencer, New Jersey Law Journal, and Cannabis Business Executive columnist, frequent Pennsylvania Bar Institute, and National Bar Institute author and lecturer and serves as a court-appointed judge pro tempore and arbitrator.
NCIA Committees: Spring 2020 Update On Achievements And Projects
NCIA’s member-driven committees are an opportunity for individuals from NCIA member companies to get directly involved in specific industry issues and sectors. These volunteer-driven efforts engage members’ expertise and passion to drill down in those areas to effect change, provide professional development opportunities, and develop best practices and guidelines that will shape the future of our industry.
We recently checked in with these various committees to learn more about what they’re up to and what projects they’re working on this term. Get updated on their activities below.
Risk Management & Insurance Committee (RMIC)
The RMIC has recently contributed to several NCIA white papers and educational webinars. They are currently working on an insurance manual. The committee has divided into sub-committees responsible for managing white papers, webinars, and the manual.
Scientific Advisory Committee (SAC)
SAC’s vision is to disseminate educational materials to NCIA members on scientific topics in the cannabis industry and to advise on other NCIA initiatives, ensuring that any formal recommendations produced are scientifically sound, sustainable, and legitimate. This term, SAC published a blog discussing why everyone should know about the endocannabinoid system.
SAC is working on other pieces addressing topics such as the recent vape illnesses from a physician’s perspective, indica versus sativa designation, how cannabis can help the opioid crisis, common scientific myths confusing the industry, and budtender and consumer education about the endocannabinoid system.
SAC is also developing a webinar that discusses what should be on a label, how to read a label, and how to associate what’s on a label with either statements on efficacy or marketing/branding.
Cannabis Cultivation Committee (CCC)
The committee has recorded two podcast episodes for NCIA’s Cannabis Industry Voice Podcast. The first was a Cultivation Best Practices Roundtable, hosted by Noni Goldman of the CCC. In that episode, Cody Hitchcock of Smokey’s 420 and James Cunningham of Fog City Farms were interviewed to shed light on their different growing styles and techniques, focusing on the ways that they implement sustainability in their operations.
The second soon-to-be-released interview was with High Times’ new CEO Stormy Simon, and was hosted by CCC Chair Mo Phenix and member Noni Goldman. This interview explored Stormy’s history and how she got to where she is today, as well as what High Times is up to, and where Stormy sees the industry going.
More podcasts to come in the next couple of months from the CCC! Keep an eye out for an episode or two on regenerative agriculture.
Packaging & Labeling Committee (PLC)
The PLC sub-committees have each contributed to a blog or presentation up to this date. The Sustainability sub-committee has worked with Kaitlin Urso and team in regards to their White Paper. A panel discussion proposal has been submitted for future NCIA conferences.
NCIA’s Northeast Cannabis Business Conference in Boston (February 2020) Panel Discussion on the Future of Cannabis Packaging went great!
State Regulations Committee (SRC)
NCIA’s State Regulations Committee has continued to produce content to help educate and inform members on the latest developments in the world of state regulation of cannabis. As the industry’s law and regulations change quickly across the country, the SRC members stay ahead of the curve and share their insight in a variety of forms. These projects include panel presentations at NCIA conventions, published blogs, and interactive webinars. In this quarter, they published three blogs, produced one webinar, presented on two panels, and participated in an NCIA summit.
As the committee strives to keep everyone updated on burgeoning legal topics, the SRC committee presented a webinar on Michigan, a newly regulated market. The webinar provided information on this key Midwestern state, “Michigan’s Adult-Use Market – What Comes Next?”
Conferences:
SRC members also traveled from across the country to share their expertise on panel sessions at NCIA’s Northeast Cannabis Business Summit in February 2020 in Boston.
The Social Equity Sub-Committee leaders, Erin Fay, Chris Jackson, and Margeaux Bruner provided helpful insight during their session, “What You Need To Know For Winning Applications and Successful Operations That Promote Diversity and Inclusion.”
Sean Donahoe and Gabriel Cross of the SRC’s Interstate Commerce Sub-Committee presented on the issues surrounding interstate commerce and strategies for preparing for this anticipated change in the cannabis industry.
Also, SRC members participated in the NCIA’s summit about tackling the illicit market.
The State Regulations Committee is excited about its work and continues to stay knowledgeable about the ever-changing legal and regulatory landscape. Their projected work includes a webinar on the Illinois adult-use market and a wide range of written projects. Stay tuned!
Banking & Financial Services Committee (BFSC)
The committee’s vision is to provide the NCIA member base with current and actionable information related to Banking and Financial Services in the State legal cannabis industry.
They have implemented monthly newsletters for the member base and have been extremely active in response to the proposed federal legislation regarding banking and the cannabis industry.
Human Resources Committee (HRC)
The Committee’s vision is to provide best practices in all disciplines of Human Resources to NCIA members. They have worked on a couple of blogs this year around the recent reduction in force trend and will be releasing a few blogs providing some recommendations for how cannabis employers can navigate CV-19 when it comes to their workforces.
The HR Committee is working on a very exciting case study. They are looking forward to releasing the first few modules of it this summer!
Marketing & Advertising Committee (MAC)
The MAC coalesces the talents of 20 of the industry’s top-tier marketing and communications professionals around three focus areas: Education, Advertising Access and 2020 political goals. The committee uses their personal, professional and business skills and networks to help build a responsible, legal cannabis industry. The committee is producing best practices, webinars, workshops and social media campaigns to aggregate and generate support from NCIA members, the public, media, government and business leaders.
The MAC Education Subcommittee has focused its energies on developing a Speakers/Expert Directory with a goal to launch by year-end.
The 2020 Subcommittee has created its first infographic covering Oklahoma’s 2020 ballot initiatives; infographics for additional states with legalization initiatives on the ballot this year will follow soon.
The Advertising Access Subcommittee is adding more states (as they come online) to their overarching list of “Do’s and Don’ts” for compliant cannabis advertising. Those are pending editing and legal review and will be published on the NCIA website soon thereafter.
The committee is also working on upcoming webinars including “Advertising Best Practices.”
Cannabis Manufacturing Committee (CMC)
The Cannabis Manufacturing Committee is focusing on reviewing existing business practices and state regulations of concentrates, topicals, vaporizers, and edibles ensuring the manufacturing sector is helping shape its destiny.
They are also working on their second publication, “Facts About Current Good Manufacturing Practices (cGMPs) And Their Role In The Cannabis Industry” which will be a resource for essential businesses.
In addition to the work the CMC is carrying out, they are collaborating with other committees to help create an NCIA resource library.
The CMC Testing sub-committee is working on writing blogs about “Positives of Testing” (from the operator’s view), and “Nomenclature: Cannabis Nomenclature Register” for publication.
Retail Committee (RC)
Members of the Retail Committee attended NCIA’s Northeast Cannabis Business Conference in Boston in February 2020 to participate in an educational panel on Retail 101. The committee has an upcoming webinar in April: “Retail: Tips and Best Practices” which will include 4 panelists that are currently license holders or working in licensed dispensaries in 3 different states (CO, CA, WA), and will also address some tips and best practices for the current CV-19 climate.
Facilities Design Committee (FDC)
Committee member David Vaillancourt of The GMP Collective appeared on NCIA’s weekly podcast, NCIA’s Cannabis Industry Voice, in February 2020 to discuss GMPs (Good Manufacturing Practices) in an episode titled “Revolutionizing How Cannabis Producers Achieve Success.”
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Gary Paulin is VP of Sales and Client Services at Lightning Labels, a Denver-based custom label printer that uses state-of-the-art printing technology to provide affordable, full-color custom labels and custom stickers of all shapes and sizes. Contact: sales@lightninglabels.com; 800.544.6323 or 303.481.2304.
We are NCIA’s Diversity, Equity, and Inclusion Committee (DEIC), comprising experienced professionals representing a diverse range of backgrounds. In response to the early results of the Illinois Adult Use Dispensary application process, and with the interest of supporting Illinois’ Social Equity efforts, we felt compelled to reach out and offer our analysis and recommendations.
Bobby Combs is National Account Executive at 
Mark Hefner, 
Retail, too, has benefited from advances in delivery technology. Today, you can order a product or service with the click of a button, pay for it remotely, and have it delivered at your doorstep. The cannabis industry is already in on these advances. In states where marijuana consumption is legal, there are apps you can use to order a marijuana product and expect a home delivery in minutes. 
Sean Dawson is the Director of IT Solutions at Office1. Office1’s 
On a normal day, the majority of the population is online. Now that many companies have transitioned their employees to work from home, or shut down altogether, even more people are spending time online. More people are on 
Adults are using social media up to 
Samantha Vanegas retains a MBA from the University of Florida Warrington College of Business. 
Alex Hearding
Andy Poticha is principal at 
Merril Gilbert, Co-Founder and CEO of 
David Vaillencourt, CEO of 
Sahar Ayinehsazian is an attorney in Vicente Sederberg‘s Los Angeles office, where she focuses on corporate transactions, cannabis banking, and regulations. With her specialized knowledge, Sahar helped to establish and currently co-leads Vicente Sederberg’s Banking and Financial Services Department. As a member of the National Cannabis Industry Association’s Banking Access Committee, Sahar also works on strategy and educational advocacy to enable state-licensed businesses to obtain accounts at depository institutions.
Kelsey Middleton is a Regulatory Specialist in Vicente Sederberg’s Los Angeles office, where she focuses on licensing and regulatory compliance. Kelsey is responsible for assisting a dynamic range of cannabis clients in obtaining state and local cannabis licenses, permits and approvals, and navigating the complex and rapidly evolving regulatory landscape of the cannabis industry. She routinely helps clients prepare the requisite applications and documentation for state and local licensing and permits, and facilitates communications with cannabis industry regulators to promote efficiency and compliance throughout the licensing process.
Calvin Shannon is a Pricipal of Bridge West and has over 17 years of experience providing tax, audit, estate planning and trust services. Calvin is skilled at understanding client’s challenges and working with them to develop and implement innovative and unique solutions. Assists organizations to address the industry’s unique and ever-evolving issues. He enjoys having the opportunity to work with cannabis clients to understand their business needs, and to provide timely solutions
Nina Simosko serves as Chief Revenue Officer for 
BriAnne Ramsay is the CEO of 
Karen Mayberry is the Marketing Director and Co-Founder at 
2019 National Law Journal “Finance, Banking, & Capital Markets Trailblazer” award winner, Steve Schain chairs global cannabis law firm Hoban Law Group’s PA and New Jersey practice and chairs its Financial Services Group. With 17 offices and 52 lawyers, 