Guest Post: Changes to Colorado Residency Requirements
By Charles Alovisetti, Senior Associate at Vicente Sederberg, LLC.
This is article is the second in a series, which will provide a general overview of the laws that impact raising money in the cannabis industry.
Introduction
Colorado currently has the strictest residency requirements for ownership of marijuana establishments in the United States, imposing a two-year residency requirement for any owner of a licensed business. In addition to the constraints imposed by such a lengthy residency requirement, the Colorado Marijuana Enforcement Division (the “MED”), which is the regulatory body concerned with the marijuana industry, takes a broad view of what constitutes ownership (e.g., guarantying the debt of a licensed entity can constitute ownership). Earlier this year, on May 11, 2016, in order to address the funding difficulties created by the strict residency requirements (note that because the changes to the residency requirements apply to both medical and retail marijuana businesses, this article will not distinguish between the two when discussing the legislative changes and will simply refer to licensed entities, which shall mean both medical and retail licensed entities), the Colorado Senate passed Senate Bill 16-040, as amended by the House, commonly referred to as the “Residency Bill” (the “Bill”). The Bill was subsequently signed into law by Governor Hickenlooper on June 10, 2016. The Bill, which goes into effect on January 1, 2017, will radically change the residency requirements imposed on licensed businesses. These changes are addressed in detail below. This article, with limited exceptions, only addresses the changes explicitly described in the Bill and does not address the further complexities raised by draft rules promulgated by the MED regarding the Bill since these rules are not yet final.
Current State of Colorado Law
As noted above, in addition to requiring that all owners of a licensed business be at least two-year Colorado residents (and must also meet certain background requirements), Colorado takes the view that a person or entity that has a beneficial interest in a marijuana business and/or substantial control over a marijuana business is considered an “owner.” A beneficial interest has been informally defined as being paid based on profits (whether gross or net). In determining if a person or entity has an ownership interest in a marijuana business, the state considers a non-exhaustive list of factors, including whether a person or entity 1) bears risk of loss and opportunity for profit; 2) is entitled to possession of the licensed premises; 3) has final operational decision-making authority over business; 4) guarantees the businesses’ debts or production levels; 5) is a beneficiary of the business’s insurance policies; 6) acknowledges tax liability for the business; 7) acts as an officer or director of the business; 8) is contracted to manage the overall operation of the business; 9) has a licensing agreement with the business (note that it is possible to structure licensing agreements so as to avoid triggering the determination of ownership, but this can be complicated); 10) has ownership of shares or other equity interests of the licensed business; 11) has a secured interest in furniture or fixtures directly used in the manufacture or cultivation of marijuana; or 12) has a secured loan with the business. In addition, any security interest in the furniture, equipment, or fixtures used directly in the manufacture or cultivation of marijuana or marijuana product may be considered ownership depending on the circumstances. Given the thoroughness of the foregoing list, it’s not difficult to understand why licensed entities have had difficulty raising capital from out-of-state investors.
However, Colorado laws do allow for out-of-state residents to invest in marijuana businesses through a permitted economic interest (“PEI”). A PEI is a financial interest in the form of an unsecured debt instrument, option agreement, warrant, or any other right to obtain ownership interest in a marijuana business, provided the conversion or transfer right is contingent on the holder qualifying as an owner and obtaining licensure as an owner by the MED – this could be upon the occurrence of either the holder meeting the two-year residency requirement or a change in law (which the Bill represents). A PEI may only be held by a natural person who is a U.S. resident. Holders of PEIs are subject to fingerprinting and criminal history background checks and must disclose financial and personal information with the MED in their applications. As of today, PEIs remain useful to licensed businesses since they allow them to accept out-of-state investment in advance of the Bill going into effect. On January 1, 2017, PEI holders will become eligible to have their interests converted into equity holdings in licensed businesses. After the Bill goes into effect, any kind of option, warrant, or similar convertible instrument will still be required to take the form of a PEI.
New Residency Bill
Before delving into the specifics of the Bill, it is worth noting that the summary attached to the Bill contradicts the actual law, as it was written prior to the passage of the final version of the Bill, and it should be ignored.
The Bill adds a number of new defined terms. Understanding these new terms is the key to understanding the Bill:
Direct Beneficial Interest Owner: Prior to the Bill, there was only a defined term for “Owner”; that concept has now been split in two – Direct Beneficial Interest Owner and Indirect Beneficial Interest Owner. Under the existing system, any level of control that the MED, using the 12-factor test outlined above, determined rose to the level of ownership resulted in the entity or individual being listed as a zero percent Owner (e.g., an individual who guaranteed the debts of a licensed entity might be considered as a zero percent Owner of that business, despite owning no equity in that entity). The term Direct Beneficial Interest Owner is meant to cover existing Owners who directly hold equity in a licensed entity. Direct Beneficial Interest Owners are subject to residency requirements and full background checks (except for Qualified Limited Passive Investors, a type of Direct Beneficial Interest Owner described in detail below). A Direct Beneficial Interest Owner must be either a resident of Colorado for at least one year or a US citizen. Publicly traded companies are explicitly barred from holding licenses.
Indirect Beneficial Interest Owner: The second new category that was previously included in Owner is Indirect Beneficial Interest Owner. No residency requirement exists for an Indirect Beneficial Owner. An Indirect Beneficial Interest Owner includes the following individuals and entities: (a) a holder of a PEI, (b) a recipient of a commercially reasonable royalty associated with the use of intellectual property by a licensee, (c) a licensed employee who receives a share of the profits from an employee benefit plan, (d) a qualified Institutional Investor (defined below), or another similarly situated person or entity as determined by the state licensing authority. The Bill does not explicitly state what kind of background check will be required for an Indirect Beneficial Interest Owner. Currently, the draft rules set forth an identical set of criteria to determine suitability to those for Direct Beneficial Interest Owners, but this may change in the final rules.
Institutional Investor: Up to 30% of a licensed business can be held by an Institutional Investor, and the Bill does not contemplate any residency requirement for an Institutional Investor since an Institutional Investor will be considered an Indirect Beneficial Interest Owner and residency requirements only apply to Direct Beneficial Interest Owners. The Bill sets out a list of entities that meet the definition: banks, registered investment companies, ERISA funds, and any other entities to be identified during the rule-making process. The current draft rules do not list any types of entities not specifically identified in the Bill. While not discussed in the Bill, the draft rules and legislative history make it clear that an Institutional Investor must be passive and may not have any control over a licensed company beyond voting its shares (meaning that the minority protections present in a typical non-control transaction cannot be present).
Qualified Limited Passive Investor: This is defined as a natural person who is a U.S. citizen and is a passive investor owning five percent or less of the equity of a licensed business.
New Residency Rule
In place of the existing rule that requires all Owners to be at least two-year residents of Colorado, the Bill now allows an entity to be either (i) held by an unlimited number of Direct Beneficial Interest Owners, each of whom must meet the one-year Colorado residency requirement, or (ii) if one or more Direct Beneficial Interest Owners do not meet the one-year residency, then the following conditions must be observed: (a) At least one officer of the licensed entity must be a Colorado resident of at least one year, (b) all officers with day-to-day operational control over the business must be Colorado residents of at least one year, and (c) there must be no more than 15 Direct Beneficial Interest Owners (this limitation is measured by natural persons on a look-through basis). A licensed business, whether wholly held by Coloradoans meeting the residency requirement or held by one or more Direct Beneficial Interest Owners who do not meet the residency requirement, may also have up to 30% of its equity held by qualified Institutional Investors.
Reasonable Royalties Now Allowed
One additional major change in the Bill is the allowance for commercially reasonable royalties to be paid to Indirect Beneficial Interest Owners. As the law currently stands, a royalty would be considered a form of ownership by the MED (as the royalty would likely be based on the profit of the licensed entity) and would thus make the recipient of the royalty subject to residency and other ownership requirements. In addition, the current system requires all of the Owners to be present at MED meetings—which presents a major obstacle to the operator of a licensed business who wants to enter into multiple licensing agreements since any licensor could potentially put a license at risk by refusing to attend a meeting or by committing a bad act. However, Indirect Beneficial Interest Owners, while still subject to background checks, are not subject to residency requirements or the limitation of 15 natural persons (as is the case for Direct Beneficial Interest Owners when one or more equity holders does not meet the one-year Colorado residency requirement). It may also be the case, though we will need to wait for the final rules, that removing an Indirect Beneficial Interest Owner is easier than removing a Direct Beneficial Interest Owner from a license.
Conclusion
As noted above, the MED is granted authority to promulgate rules pursuant to the Bill, and final analysis of the Bill will require careful study of these new rules. The MED is currently accepting written comments to the draft-proposed rules in advance of a formal, public hearing regarding the permanent rules on Friday, September 2, 2016. In addition, as with any other change in a regulatory regime, we will need to pay close attention to how the Bill plays out when actually put into practice.
This information is educational only and shall not be construed as legal advice. Please consult your attorney prior to relying on any information in this article.
Charlie Alovisetti, Vicente Sederberg LLC
Charlie Alovisetti is a senior associate and co-chair of the corporate department at Vicente Sederberg LLC. Prior to joining Vicente Sederberg, Charlie worked as an associate in the New York offices of Latham & Watkins and Goodwin where his practice focused on representing private equity sponsors and their portfolio companies, as well as public companies, in a range of corporate transactions, including mergers, stock and asset acquisitions and divestitures, growth equity investments, venture capital investments, and debt financings. In addition, Charlie has experience counseling portfolio and emerging growth companies with respect to general corporate and commercial matters and all aspects of compensation arrangements, including executive employment and consulting agreements, stock option plans, restricted stock plans, bonus plans, and other management incentive arrangements. Charlie has experience in both U.S. and cross-border transactions, and has advised clients across a range of industries including cannabis, technology, manufacturing, software, digital media, energy and clean tech, healthcare, and biotech. He holds a Bachelor of Arts, with honors, from McGill University and a law degree from Columbia Law School, where he was a Harlan Fiske Stone Scholar. Charlie is admitted to practice in both Colorado and New York.
Member Spotlight: Cannabis Consumers Coalition
In the cannabis industry, the life cycle of growers, retailers, extractors, and infused product manufacturers would not exist were it not for the consumers. As we move toward self-regulating our industry from the inside out, it’s important to consider all views and perspectives in those decision-making processes. This month, we check in with Larisa Bolivar of Cannabis Consumers Coalition to talk about the work she’s doing to protect the interests and concerns of cannabis consumers.
I have been in the cannabis industry/movement since 2001 when I moved to Colorado as a medical cannabis refugee, and I have been a cannabis consumer for 25 years. I helped to establish safe access for Colorado patients through my organization called Caregivers for Safe Access, which became the Colorado Compassion Club and the first dispensary in Colorado prior to 2009. After several years on hiatus from the front lines of the movement, and spending time consulting on policy, business and communications in the emerging industry, I saw a need for more consumer-focused advocacy and that what was missing was a consumer protection agency. Much of the conversation had been focused on the needs of the industry, and that continues to play out today. It is my mission to change that. I believe that consumers are who drive the economy.
I believe my background is perfect for the task of playing watchdog for the industry. I have worked in startup and corporate environments in multiple emerging markets, including software, dot-coms, clean tech, and cannabis. My work in clean tech and software really prepared me for working in a tightly regulated environment. The clean tech company that I worked at, GridPoint, a billion-dollar-valuated startup with successful launch and exit is a smart grid company focused on energy management in the utility space, one of the most regulated industries in our country. When working in software, I worked as a technical recruiter staffing sensitive, high-level technical contracts mostly in defense, which is also highly regulated. I understand highly regulated environments really well, and it is easy to forget the consumer when trying to jump through so many regulatory hoops. I believe that with a strong consumer voice, we will eventually have fewer regulations.
Larisa Bolivar, Executive Director of Cannabis Consumers Coalition.
How does CCC provide unique value to the cannabis industry and movement?
The mission of the Cannabis Consumers Coalition is to provide cannabis consumers with a voice in the growing cannabis industry, and to ensure consumer rights and ethical behavior on behalf of cannabis-related businesses. The biggest value we provide is giving consumers a powerful voice and helping them to realize the purchasing power they have with their dollar in helping to hold the industry accountable to operating in an ethical, consumer-centric model. We provide consumers with a powerful voice, and have been very effective in changing laws to protect consumers. This occurred recently when we obtained and released the names of pesticide violators in Colorado. We quickly made a lot of enemies, and good friends, in the industry. Some business owners have called us anti-industry, which is quite the contrary. I risked my life trailblazing medical marijuana and laying the foundation for the launch of a billion-dollar industry in Colorado. This was pre-regulation, prior to when moneyed interests got into the game and created the framework for regulations. The industry began with blazing the path to create that possibility, breaking ground for the foundation to be laid. As such, I feel personally accountable for it, along with many of my peers and supporters who were also trailblazers and pioneers.
Consumers deserve the right to know that the cannabis they are purchasing is indeed the quality that is being marketed. They also need a strong voice to fight for their rights, and that is what I myself provide, especially with my history of activism, along with the support of our legal team at Fox Rothschild LLP. An Am Law 100 law firm, they have nearly 750 attorneys spanning multiple practice areas and across multiple industries, and have a reputation for working with nonprofit organizations and community groups.
Another value we provide is in helping businesses strive to provide the best consumer experience and high quality products. Quality end products in the cannabis industry are multi-faceted, starting with how a plant is grown, how it’s positioned in the market, to the consumer experience at retail outlets. All of it is so interrelated.
Here in Colorado, the issue of public consumption is hot and there are a couple of initiatives in the works this year to address that need. Can you tell me more about that and how you’re involved in this effort?
Indeed this is probably the hottest issue Colorado. Voters voted for the right to use cannabis legally, yet there are no places to consume. This also poses issues for cannabis consumers visiting the state. There are bed and breakfasts and some hotels that allow for consumption, but there are no places to consume and socialize. There are two initiatives in consideration.
There is the Responsible Use initiative put forth by Denver NORML, which is a private club designated license that requires people to become members, bring their own cannabis and allows for permitted events. The other initiative, The Neighborhood Approved Cannabis Consumption Pilot Program Initiative, will give permission to businesses, including bars, to allow cannabis consumption. Either one will be good for consumers. One is more exclusive, and by requiring membership it keeps things manageable and accountable by limiting the amount of people who can join, it does alienate neighborhood groups and businesses. My concern with the initiative permitting businesses to allow consumption, including bars, is that tourists new to cannabis consumption and consuming alcohol, can easily over-consume the two if they are not “seasoned” cannabis consumers.
Why did you join NCIA?
We joined NCIA after careful research into industry trade groups and selected the one that was the most diverse, influential, and had an ethical and inclusive industry. It is our desire to see a successful multi-billion dollar industry built on a foundation of integrity and inclusiveness, and NCIA offers that. While we may not align with the philosophies of all members, the organization pushes integrity in all that is does, and what I like the most is that it has organized councils that are really committed to creating an exemplary foundation for the entire industry, not just its members. You can see this in their Minority Business Council, where the discussions are always industry and community focused. I also like the networking available, especially meeting other passionate cannabis business owners across the country and having dynamic and energizing conversations.
Colorado Cannabis Cultivators: Participate in an Energy Use Case Study
The Cannabis Conservancy (TCC) is inviting all types of growers (indoor, greenhouse, and outdoor) in Colorado to participate in an Energy Use Case Study for the Colorado Energy Office (CEO). Growers can choose to be named and celebrated for their participation or remain absolutely anonymous. Participation is requested as soon as possible, and no later than July 31, 2016. If you are interested, contact Jacob Policzer, President of TCC, today.
The Study TCC has been contracted by the Colorado Energy Office to conduct a research report on energy use in the marijuana cultivation industry. The purpose of the report is to understand where the industry is developing in Colorado, how energy (and water use) by the industry is impacting our grid (and water supplies), what is feasible and available to the industry in terms of operational and technological efficiencies and funding, and to create a baseline for the industry with accurate data. As part of this study, TCC is required to conduct case studies and work with growers of varying operational types (outdoor, indoor, and combination) in the state to track interval load data to create a baseline for the industry.
Grower Involvement Growers will be required to have smart meters and sub meters installed at their operations and participate in an individualized on-site participant energy workshop. TCC will pay for the installation and maintenance of the meters as well as compensate growers for workshop participation. The choice to participate anonymously or publicly is absolutely at the discretion of the participant.
The individualized participant energy workshop will include: document reviews, building envelope analysis, grow system analysis (based on TCC Sustainability Standards), interviews, and meter installation.
What are the Benefits to Growers? By participating in the case study, growers will learn very detailed information about their energy consumption, which is the first step in system optimization, leading to higher yields and cost savings. Growers will also receive energy and water use consultation services from TCC for system optimization and are one step closer to Sustainability Certification. If growers choose to be named in the case study they are demonstrating their industry leadership and commitment to sustainability.
What is the Colorado Energy Office (CEO)? The CEO’s mission is to improve the effective use of all of Colorado’s energy resources and the efficient consumption of energy in all economic sectors, through providing technical guidance, financial support, policy advocacy, and public communications.
What is The Cannabis Conservancy (TCC)? TCC’s mission is to empower and assure that the regulated cannabis industry achieves environmental, economic, and social sustainability.
I began my career as a professional chef at high-end, Michelin Star restaurants in San Francisco. I worked with phenomenal chefs, and I always had the goal of being a James Beard award-winning chef. Cooking was my passion, and I learned from the best about sourcing ingredients and creativity in the kitchen.
When I was cooking, the Bay Area was home to a new sustainability movement that focused on local ingredients. Pioneering chefs like food activist Alice Waters led a sustainable revolution that spread across the country. Local, seasonal cooking has replaced elaborate neo-classical cuisine. Diners want to know where their ingredients are from, and why the chef has chosen a specific preparation. Our cooking at home is more aware too.
I was thinking about ingredients and recipes a decade ago, when I got involved with cannabis edible products. A friend approached me about making edibles when his father, a cannabis patient living with HIV/AIDS, could no longer smoke. Pharmaceutical medications prescribed to patients for wasting syndrome and other complications from HIV/AIDS caused nausea, and cannabis proved an effective counterbalance.
I started getting positive feedback on my edibles’ effectiveness for pain, nausea, sleep problems, stress, depression, and end-of-life transitions for those in hospice. I remember a call from a patient who was on the edge of tears because cannabis allowed them to enjoy breakfast. I saw what a beautiful thing it is to ease people’s suffering, and I was all in from that point on.
At a recent event, I spoke with a woman about her catering services, a service that pairs fine dining with smoked flower. When I asked about using cannabis as an ingredient, psychoactive or not, she said it was “too dangerous.”
I realized that even though Colorado has had adult-use cannabis for more than two years, and medical cannabis for longer, there’s still so much fear about edibles. Media attention on a few bad actors is keeping consumers away from a cannabis product with incredible potential for good.
Edibles producers are waging a constant battle against misinformation. Legislators react to perceived public concern by over-regulating our sector. Regulation is relentless: new measures take shape before we have time to measure existing rules’ effectiveness. Edibles companies struggle for survival as new, hastily crafted, fear-based regulations are enacted.
Over-regulation has become counter-productive. Our concerns about restrictive standards for marking, stamping, and packaging limit our ability to be creative with ingredients and presentation. As a chef, it’s disheartening.
Mountain Medicine recently became the first edibles company to co-brand with a mainstream (non-cannabis) food manufacturer. On my constant hunt for the best local ingredients, I discovered Highland Honey, a beautiful, locally sourced raw honey from Boulder. I was lucky that the owner aligns with my values and beliefs about local ingredients and cannabis as medicine. Sadly, regulatory hurdles, liability, and image concerns keep exciting partnerships out of reach for edibles producers and the industry as a whole.
It’s frustrating to create a great product and make it bend to regulations that prioritize fear over food quality. As legislators attempt to protect consumers, edibles are treated more like poison than food, and patients lose access to quality products.
As I expand my business, I’m often advised not to mention edibles. Cannabis is normalizing, but there’s still a huge stigma attached to edibles. Irrational fear keeps consumers away from the healthiest, most controlled way to consume cannabis. I’ve seen first-hand the incredible impact edibles can have on quality of life, but I worry that patients won’t have the chance to experience it themselves.
Activists have endured a difficult, decades-long battle for any access to cannabis. The fight we are facing now for access to edibles will be just as difficult.
As cannabis enters the mainstream, our entire society is beginning to understand the many positive effects of cannabis. We fought for decades to bring the truth about this amazing plant to light, but current perceptions about edibles make it clear that it’s not over yet. Our challenge now is to shape the conversation about these products and the relief they bring. The freedom to consume cannabis is critical, but the fight for access to quality products will shape this industry’s future for many decades to come.
Jaime Lewis has more than nine years of experience managing the production of medical marijuana-infused products (MIP), as well as all facets of managing and operating a medical and recreational marijuana dispensary. A California Culinary Academy graduate, she’s worked in many highly acclaimed kitchens, including serving as the executive chef of a Michelin-rated three-star restaurant in San Francisco. She began creating medical marijuana edibles for HIV/AIDS patients in California in 2006 as part of a Compassion Co-op.
In 2009, Jaime moved to Colorado and founded Mountain Medicine, a medical marijuana-infused product manufacturer. Mountain Medicine supplies high-quality medical and recreational marijuana edibles and products to a number of dispensaries throughout the state. As the founder and executive chef, Jaime designed the commercial kitchen and supervised its start-to-finish construction. She developed recipes leading to a variety of product lines to meet patients’ individual needs and developed product packaging that favors discreet design on behalf of patient confidentiality and safety.
Jaime is responsible for strategic planning and business development, policy development and governmental affairs, marketing and serves as the community liaison to demonstrate good corporate citizenship.
Jaime is an active member of the cannabis community. She is one of the founders and serves as the Chair of the Cannabis Business Alliance, as well as chairing the board of the National Cannabis Industry Association. Jaime takes great pride in changing the conversation around safe and responsible cannabis use both in the state of Colorado and on the national level.
Editor’s Note: In January, Ean Seeb, who serves on the Board of Directors for NCIA and is co-founder of Denver Relief and Denver Relief Consulting, coordinated with NCIA’s Director of Government Relations Michael Correia to arrange personal meetings with congressional offices in Washington, D.C.
Ean Seeb speaks at NCIA’s Policy Symposium in 2015
In December, while planning for a January business trip to Washington, D.C., I realized that I should take the opportunity to use some downtime to lobby Capitol Hill offices on issues affecting the cannabis industry. I reached out to NCIA’s Executive Director Aaron Smith and Director of Government Relations Michael Correia and announced my intention. I was amazed at their responsiveness and support for my idea.
The whole planning process was quite easy. I let them know the date I was available and the focus of my trip and let the D.C. office coordinate logistics. Denver Relief Consulting has business interests in Hawaii and I wanted to focus on that state’s Congressional delegation. My goals were to update offices on medical marijuana implementation in Hawaii and ask these offices to co-sponsor The Small Business Tax Equity Act of 2015 (S. 987 & H.R. 1855), which amends Internal Revenue Code Section 280E to allow cannabis businesses in compliance with state law to take standard tax deductions and credits relating to business expenses.
The trip went very smoothly. I met up with Michael the evening before our meetings to discuss issues and logistics. Although I am well-versed on issues affecting our industry, it was really informative for me to sit down with him and discuss our focus, strategy, and talking points. We were joined by NCIA Member Tae Darnell, CEO of Sensi Media, whose background on cannabis reform in Hawaii goes back many years and was a great asset to our meetings.
We visited offices in both the Senate and House of Representatives, and each office was very informed about cannabis issues, was responsive to our concerns, and asked insightful questions. I remember back in 2013 when NCIA held its 3rd annual member lobby days. During those meetings, staffers would drop their jaws and say “You’re here to talk about what?” It was almost humorous because, back then, staffers were still in shock that cannabis issues were being brought to them. This time, one of our meetings lasted a full hour! The reception from congressional offices has evolved significantly over the past five years, and that can be attributed to the work NCIA has done on the ground.
The National Cannabis Industry Association’s 5th Annual Lobby Days in Washington, D.C.
Although our meetings were with Democratic offices, who tend to be supportive of our issues, they were still not co-sponsors of legislation that would solve our 280E tax problems. The offices really appreciated tying the issue to Hawaii and answering questions specifically related to the state and how 280E will negatively affect their constituents. Each of the offices will discuss co-sponsoring legislation in the future, and our D.C. office will continue working with them to gain their support.
I did my homework with information provided by NCIA through newsletters, packets, and the website. An hour’s worth of studying on the front end made for some really powerful and effective meetings. As an NCIA member, it was personally and professionally fulfilling to be able to leave the Capitol thinking, “Today, I made some good progress on our issues, and for our industry, through the work done with these folks.”
We love nothing more than getting our members in front of lawmakers. That’s where change happens. https://t.co/kcdYFf6oJT
I wholeheartedly encourage other NCIA members not only to go to NCIA’s 6th annual Member Lobby Days in May — but also to go to D.C. on your own. The NCIA Government Relations team will be there with you every step of the way.
As I was leaving, Michael said, “Please tell other members who happen to be traveling to D.C. that we are available for any NCIA member, at any time, who wants us to coordinate personal meetings with congressional offices.”
If you are interested in contacting NCIA’s Government Relations department to schedule meetings with Members of Congress in Washington, D.C., please email Government Relations Coordinator Michelle Rutter at michelle@thecannabisindustry for more information.
NCIA’s High-Impact Quarterly Cannabis Caucuses – Q1 Photos and Feedback
Last week we wrapped up the first quarter of our newly established event series, the Quarterly Cannabis Caucuses. Thanks so much to the nearly 500 members, speakers, supporters, and volunteers that engaged with NCIA’s federal advocacy work at caucuses in twelve cities across the country!
“Last night we attended the National Cannabis Industry Association meeting and were reminded about the crucial importance of advocacy in this election year. The continued reform of our drug laws and the nation’s growing access to cannabis is not a given.”– Kiva Confections
“I had the pleasure of attending both the Denver and Las Vegas NCIA caucuses and can’t begin to say enough good things. The content, location, and format were on point. I got to catch up with lots of colleagues, who were able to introduce me to prospective customers, and I was also able to meet several new entrants to the industry. I made amazing business connections and was able to set up 5 meetings for the following day.” – Amanda Ostrowitz, Co-Founder & Chief Strategy Officer, CannaReg§
“Last night at NCIA’s Quarterly Cannabis Caucus, I opened it up by expressing the importance of national advocacy. We all know the importance of local and state advocacy but the biggest threat to my business is 280E. This is the IRS tax code that does not allow dispensaries to write off ANY expenses. We just want to be treated like every other small business in America. This tax theft will happen every year until the tax code changes. Simply put, the IRS has robbed me and my patients. This is just one reason why federal law MUST CHANGE. Get involved, get active, and join the National Cannabis Industry Association.”– Aaron Justis, Buds & Roses
Looking for downloadable versions of the information we provided at the first round of Cannabis Caucuses? Check out our Cannabis Caucus Resources page.
The next events in the Quarterly Cannabis Caucus series will come to you in April. So check out the dates below, mark your calendar, and register online now by visiting the NCIA Events page!
Have any feedback from an event you attended? Want to suggest a particular topic you would like covered at our next Cannabis Caucus in your area? Fill out our short attendee survey to provide us with valuable feedback we’ll use to improve future events.
Interested in sponsoring an upcoming Cannabis Caucus in your area or a series of events across the country? Check out our Cannabis Caucus sponsorship guide which outlines pricing and benefits, as well as discounts on packages for our third annual Cannabis Business Summit & Expo taking place this year in Oakland, June 20-22.
See you at the next Caucus!
Guest Post: Supplementing Greenhouse Lighting in Winter Months
As the seasons change, so does the amount of light that enters into your greenhouse. Summer months may offer an abundance of natural light; however, the longer nights of winter require supplemental lighting for growers to achieve the best yield possible from their crop. Some greenhouse facilities shut down during the winter months due to natural lighting restraints, but there are easy solutions that can mean more harvests and bigger profits for growers. The first step is to target a daily light interval (DLI) number for each facility and design the supplemental light accordingly. This ensures optimal light intensity and uniformity in the facility year-round.
On Site
Recently, Colorado marijuana cultivators have begun to move into more efficient greenhouse structures. With proper planning and execution, these growers are experiencing as much or more success as indoor gardeners. It does take proper planning to get through the short days of the winter, and owners are turning towards horticulture companies to help them succeed. Based on the sun’s position in the geographical region, high tech control systems with DLI sensors can be installed to measure when the natural light falls below a certain level and the supplemental light is needed to optimize growth.
For example, at urban-gro, once we know the facility’s DLI and obstructions within the greenhouse structure, we begin the planning process and consider technical factors for the layout of the lighting system. Ensuring optimal lighting layout for the grow facility is the top priority. Incorporating lights into the structure so they create minimal shadowing is critical; this ensures that the crops are getting the optimal amount of natural light when the sun is shining.
Today, most grow facilities use 1,000-watt DE HPS light fixture, which is the most efficient light source on the market for the plant canopy. Once the lighting system is installed, it is essential that the correct intensity is aligned with the crops’ growth stage, which ranges from veg to bloom. We schedule a gradual increase of light intensity so yield is maximized and never harmed.
End Result
With supplemental lighting, cultivators can guarantee the correct amount of lighting and environmental controls for the winter months to ensure yields and profits.
Shelly Peterson serves as Vice President of Sales for urban-gro for the last three years. Shelly manages the company’s sales force located across the country. Her passion for eco-friendly solutions and creating a sustainable environment ensures that the commercial cultivator is provided with a lighting plan that utilizes the least amount of equipment. Further, her skills learned in the commercial lighting industry have enabled her to work with regional electrical providers to maximize available utility rebates for urban-gro’s customers. Urban-gro is a Sustaining level member of NCIA since November 2014.
Announcing NCIA’s January – June 2016 Events Calendar
Do you have questions regarding any upcoming events in your area or others across the country? Reach out to events@thecannabisindustry.org any time with your questions, comments, or concerns.
Interested in sponsoring one or a series of events in a particular region throughout the year in order to gain valuable exposure for your company to our nationwide network of established business owners? Please contact Brian Gilbert at brian@thecannabisindustry.org for more information on series rates and associated discounts for packages.
Interested in speaking at the upcoming Cannabis Business Summit? Please contact brooke@thecannabisindustry.org for more information on remaining opportunities.
Video Newsletter: 5 Years of Advocacy, Education, and Community
Even if you couldn’t attend NCIA’s 5th Anniversary Banquet held in Las Vegas on November 11th, you can still reflect on five years of industry advocacy, education, and community with a few of our founding members in this video presentation.
We are proud of the nearly 1,000 member-businesses that have come together as the unified voice of the cannabis industry.
Not yet a member of NCIA? It’s never too late to get involved in paving a prosperous future for the cannabis industry — join today!
Special Thanks to: Christie Lunsford, Jay and Diane Czarkowski, Brian Vicente, Ean Seeb, Erich Pearson, Étienne Fontán, Julianna Carella, Jill Lamoureux, Rob Kampia, and Steve DeAngelo.
Guest Post: Raising Money 101 – What’s an Offer and Why Does it Matter?
This is article is the first in a series, which will provide a general overview of the laws that impact raising money in the cannabis industry.
Any business owner planning to raise capital should consider the federal Securities Act of 1933, commonly referred to as the “Securities Act.” In addition to federal law, each state has its own set of laws that regulate securities sales, commonly referred to as the “Blue Sky Laws.” Both the Securities Act and any applicable Blue Sky Laws must be complied with in connection with the sale of securities – a security being proof of ownership or debt that has been assigned a value and may be sold (stocks and bonds are examples). Both the Securities Act and the Blue Sky Laws regulate the sale of securities by prohibiting the offer and sale of unregistered securities (other than pursuant to specified exceptions) and requiring companies to provide investors disclosure of all material facts concerning the securities for sale.
Crucially for business owners, it’s not only the actual documents to raise money that are governed by the Securities Act: so are those initial business plans and executive summaries that might be circulated to gauge interest. Ensuring that your business plans are not violating any securities laws is the focus of this article.
In analyzing whether a transaction or communication is in compliance with the Securities Act and Blue Sky Laws, it’s helpful to think through the following questions:
Does the transaction or communication constitute an offer or sale?
Is the offer or sale of a security (as defined in the Securities Act and the Blue Sky Laws)?
If there is an offer or sale of a security, is the security properly registered with federal and state authorities?
If there is an offer or sale of a security and the security is not registered, does the transaction fall within one or more of the specified exemptions to registration?
As you assess your materials for compliance, begin by asking whether an offer has been made. If a transaction or communication does not constitute an offer, then compliance with state and federal securities law is not a concern. However, if an offer is unintentionally made – a common mistake – it may trigger a violation of securities law since it is unlikely that the unintentional issuer will have taken into account the necessary disclosure items and determined the relevant exemption to registration. Note that in the context of securities law, “issuer” means any company that issues or proposes to issue a security.
What, then, is an offer, from the federal standpoint and from that of the state of Colorado? Section 2(a)(3) of the federal Securities Act defines “offer” as “every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.” Under the Colorado Securities Act, “offer to sell” includes any attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value and “offer” means an offer to sell or an offer to purchase. What constitutes an offer, furthermore, may be a matter of perceived intent rather than explicit proposal: the SEC has noted that “[t]he publication of information and statements, and publicity efforts, generally, made in advance of a proposed financing, although not couched in terms of an express offer, may in fact contribute to conditioning the public mind or arousing public interest in the issuer or in the securities of an issuer in a manner which raises a serious question whether the publicity is not in fact part of the selling effort.” As a practical matter, these definitions, as well as the SEC’s guidance, mean that many communications that would not be considered offers under contract law may well be considered offers for purposes of state and federal securities law.
From a practical point of view, then, how should an entrepreneur approach an action that might be considered an offer – distributing information about a new company, for example? To mitigate risk of a securities violation, consider the following factors before circulating information about your business:
Include Appropriate Disclaimers: If you do proceed with distribution, any documentation provided to potential investors should contain disclaimers that clearly indicate that the provided information is not an offer or a solicitation of an offer to buy securities. Note that such disclaimers do not necessarily mean the document will not be considered an offer.
Require Further Information: Any documentation should also state explicitly that further information about a purchaser will be required before an offer can be made.
Minimize Details: Generally speaking, the fewer details provided about a potential security, the better. Even high-level details can result in a document being considered an offer.
Ensure Accuracy: Make absolutely sure that any information provided is correct and not misleading (i.e., do not claim that cannabis is legal in the United States, note that it remains illegal at the federal level). Avoid selective disclosure and be prepared to stand behind any claims made.
Follow Best Practices: Every communication should adhere to best practices regarding offerings in general (e.g., avoiding general solicitations, keeping track of distributed documents, etc.)
Seek Legal Counsel: When in doubt, speak to a qualified securities attorney. It’s always easier to do things right the first time, whereas it may not be possible to fix certain mistakes.
This information is educational only and shall not be construed as legal advice. Please consult your attorney prior to relying on any information in this article.
Charlie Alovisetti, Vicente Sederberg LLC
Charlie Alovisetti is a senior associate at Vicente Sederberg LLC. Prior to joining Vicente Sederberg, Charlie worked as an associate in the New York offices of Latham & Watkins and Goodwin Procter where his practice focused on representing private equity sponsors and their portfolio companies, as well as public companies, in a range of corporate transactions, including mergers, stock and asset acquisitions and divestitures, growth equity investments, venture capital investments, and debt financings. In addition, Charlie has experience counseling portfolio and emerging growth companies with respect to general corporate and commercial matters and all aspects of compensation arrangements, including executive employment and consulting agreements, stock option plans, restricted stock plans, bonus plans, and other management incentive arrangements. Charlie has experience in both U.S. and cross-border transactions, and has advised clients across a range of industries including technology, manufacturing, software, digital media, energy and clean tech, healthcare, and biotech. He holds a Bachelor of Arts, with honors, from McGill University and a law degree from Columbia Law School, where he was a Harlan Fiske Stone Scholar.
*Currently only admitted in New York
NCIA Member Profile: MBank
In the course of less than a week at the end of January, Oregon-based MBank went from announcing that they would be doing business with cannabis companies in Colorado to breaking the news that they would be retreating from Colorado for the time being, unable to support the infrastructure required to offer these services in the state. As NCIA’s first bank member, we sat down with CEO Jef Baker to ask a few questions and get to know them better.
Cannabis Industry Sector:
Financial Services
NCIA Sustaining Member Since:
December 2014
One of MBank’s brick and mortar locations in Lake Grove, Oregon.
How does MBank uniquely serve the cannabis industry?
One of MBank’s goals is to serve the underserved. We recognize that serving the cannabis industry very much meets that objective. With that mission in mind, we set about figuring out how to provide banking services. We’re a little unique in that way as a bank has to be creative and innovative in order to go about solving problems.
Why should cannabis industry professionals looking for financial services use MBank?
While we recognize there are very few banks legitimately operating in this space and therefore few good choices for cannabis industry professionals, our hope is people choose to bank with us for the same reason anyone does. That means they understand what we’re about and hopefully appreciate wanting to partner with someone that has a vision they agree with. Beyond wanting to change the status quo with regards to banking, we also take great pride in customer service through treating people with respect.
NCIA’s primary mission includes advocating for equal access to banking, but many banks in this country are reluctant or not willing to work with cannabis business owners. What are your thoughts on the future of banking in the cannabis industry? How will this situation improve for the industry going forward?
Smaller banks will most likely lead the way as they tend to embrace innovation a little more than larger institutions. As banks successfully demonstrate their ability to serve this industry, more banks will follow. If there are additional changes at the federal level, that most likely would generate more banks entering this space.
What are some of the challenges that banks have to deal with to do business with the cannabis industry?
CEO Jef Baker inside one of MBank’s Oregon locations.
Our challenge is to make sure we support and serve customers who understand that compliance is critical. We feel it is extremely important to ensure we implement strong policies and procedures, especially for new lines of business. The systems created are not designed to be intrusive or overbearing, but they are developed to help us manage risk, as we interpret it, as well as those that regulate us.
Do you still want to do business in Colorado, or other states?
The reason we are one of the first banks to so aggressively enter this space is part of our mission is to serve a completely underserved market. We very much want to serve customers in Colorado but have discovered we need to build our program to better handle the huge volume there.
How do you characterize your relationship with regulators on marijuana banking?
It is our belief that regulators do not object to their banks providing services to the cannabis industry. We believe they do have a high expectation of their banks developing strong compliance programs in this area. This is new and we are all learning together. It is critical for us to have a strong relationship with our regulators.
Why did you join NCIA?
MBank currently offers banking services for the cannabis industry in Oregon.
We believe this organization wants to see the cannabis industry be treated fairly by helping ensure that quality banking services are available. That is right in line with our mission of serving the underserved. Our position is not one that supports legalization or advocacy for legal matters (that is for others), but rather a focus on providing an industry banking services they deserve, which means both access to services as well as treating people with respect. We believe NCIA is an organization that will allow us to further and pursue that vision.
If you are a member of NCIA and would like to contribute to the NCIA blog, please contact development officer Bethany Moore by emailing bethany@thecannabisindustry.org.
Guest Post: Banking Access – The Struggle Is Real for CannaBusiness Owners
By Luke Ramirez, Walking Raven LLC
Bank accounts — normally, the most basic thing a business does when starting out is start a business checking account. Those of us in the cannabis industry, however, are very well aware of the struggle to get even basic banking while openly violating federal law. It has been an issue for cannabis companies for years; NCIA’s own Taylor West recently spoke about the banking challenges cannabis companies face in a Huffington Post article, stating, “It’s the biggest problem we have.”
Luke Ramirez, Walking Raven LLC Photo courtesy of Kim Sidwell
As an owner and operator of a retail marijuana center and cultivation warehouses, with a company, Walking Raven, which has been kicked out of more than seven banks in the last five years (including the loss of personal bank accounts), I can personally attest that this could be the most difficult part of running a cannabis company. Although there are pricey alternatives out there, the security risk of transferring and storing large amounts of cash invites crime from the criminal underworld, severely increasing your safety liability as a company. An additional burden comes with the very high cost of time it takes to manage all this cash and pay basic bills, such as power, water, and other utilities. In my company alone, we estimated a cost of over $13,000 in 2014 simply from the time it took to handle our cash.
NCIA has been an outstanding resource for myself and many other of my colleagues in tackling the banking issue. NCIA’s supportive network of other cannabis professionals has given me the advice and contacts I need to operate my business successfully, including banking. If you’re having issues with banking, I suggest that you reach out to your colleagues in NCIA for reputable ideas, or join NCIA if not already a member.
Thankfully, for the industry as a whole, the issue has been covered by the media and brought to light to the general public in much more depth in the last year since adult-use cannabis sales began on 1/1/2014; even Playboy Magazine covered the issue of banking in the cannabis industry last summer. In Colorado, Governor John Hickenlooper, who opposed the legalization of cannabis, asked the federal government to help Colorado with cannabis banking issues. In Washington State, the only other state to allow adult-use cannabis sales in 2014, the Liquor Control Board has also taken steps to help cannabis companies obtain banking, by making publicly available the sales activity of licensed growers, sellers, and processors.
Because of this exposure and the efforts of Colorado’s and Washington’s public officials, there have been major recent steps toward “above-table” banking for cannabis companies. On November 19th of last year, regulators in Colorado granted a charter to a credit union that hopes to work with cannabis companies; the union is now waiting upon an issuance of a master account number from the Federal Reserve to allow it to enter the country’s electronic banking system. In addition, there have recently been creditable solutions offered by one of NCIA’s own board members. While it is yet to be seen if these solutions are long-term, we are closer than we ever have been before to normalized banking.
A budtender at the Walking Raven shop
While we continue to wait for a mainstream solution for every cannabis company, dispensary owners and cultivators should:
Leverage their networks and gain contacts that can provide banking contacts. I recommend joining NCIA and taking advantage of the group’s reputable network if you have not done so already.
Avoid any kind of activity that could be construed as money laundering and therefore put your business in serious jeopardy. This kind of activity includes lying about the nature of your business to a bank, or using your personal accounts for a large amount of business activity.
Look into security companies that offer to handle your cash and eliminate the safety liability of using large amounts of cash. They are expensive, but may be well worth the cost for your business.
Once you obtain banking, avoid “obvious” cannabis transactions. Use cash to pay any vendor that has an obviously cannabis-related name that you must write a check out to.
When using cash, make sure to save all invoices, and get signed receipts from vendors and signed pay-stubs from employees; this will leave a much-needed paper trail in the event of an audit or investigation.
Luke Ramirez is owner and managing director of Walking Raven, LLC, a sustaining member of NCIA. Luke was also recently elected to NCIA’s Board of Directors. Luke has actively been in the cannabis industry since 2009. Since taking control of his company’s operations in 2011, he has changed the entire culture of the shop and successfully completed the process of converting all 3 licenses from medical to retail. Within his organization, he is responsible for all finance management, staffing, compliance reporting, marketing/inventory control, and public relations, among other things. Luke has been featured on many media outlets, such as CNBC, national CBS, and numerous local news stations. He is also actively involved in multiple cannabis trade organizations, lobbying efforts, and advocacy groups.
Guest Post: Tuning In on Cannabis Customers
By Mike Kennedy, Atomic20
Everybody must get stoned. Okay, so Bob Dylan was actually referring to the heartbreak of relationships in this song, not our fair state of Colorado since the legalization of marijuana in 2012. But after you take a look at the numbers you’ll likely agree that “never gonna be the same again” is a fitting Dylan lyric to describe Colorado’s current cannabis culture. That includes, perhaps most significantly, the legal bud marketplace.
A recent study prepared for the Colorado Department of Revenue painted a telling picture of marijuana usage in the state. One surprising figure is that only 9% of the population consumes cannabis in some shape or form. But it’s the flipside of that statistic that makes Colorado, and other states like it, such a tantalizing opportunity for budding marijuana businesses. While Colorado has less than 500,000 cannabis users, those users do so at extremely high rates, to the tune of more than 120 metric tons annually.
Assuming the cannabis industry is here to stay, that begs the question: who is positioning themselves to reap the benefits of this legion of dedicated cannabis users? The answer: those who understand that the legal marijuana business is just that, a business. A key to long-term, sustained success in any business is creating brand loyalty. And, as of now, we know that Colorado marijuana consumers who shop retail have yet to develop any.
This isn’t lost on us at Atomic20. We’re a creative agency that specializes in market strategy and design for marijuana companies. We recently commissioned an independent study of cannabis users with the help of consumer research expert Koert Bakker. The findings paint a clear picture of the current consumer landscape…
Less than half, or 42%, of frequent marijuana shoppers have a regular store they visit.
Only 18% of casual/occasional shoppers favor any given store.
67% of occasional buyers are still learning what they like and rely on a friend or budtender to influence what they buy.
Bottom line: There is a lot of market share to be had with nearly 80% of occasional buyers and 60% of frequent shoppers still up for grabs.
So how do you go about capturing the frequent and occasional buyer, and then convert them into lifelong brand loyalists? Obviously, there’s no simple answer to that question. But here are few things to keep in mind:
Competitive pricing: Don’t kid yourself. Price supersedes just about any other factor in most buying decisions. Offering daily promotions and periodic sales is enticing to any marijuana user.
High quality: For pot smokers, this is one factor that can take precedence over price. If they find a strain they like, they will search it out and buy it again and again. Developing proprietary strains is one way to give a retail shop its own unique identity.
Market expertise: You have to have a clear understanding of what your customers want. Merchandise your shop in a logical way. Determine which edibles sell and only carry those.
Strong social media presence: Having great product at excellent prices means nothing if consumers don’t know about you. In the medical marijuana industry, social media has become an effective way of reaching out to patients. For example, having a Facebook page gives you a way to stay in touch with customers on a daily basis.
Knowledgeable and friendly customer service: This sounds easy enough, but you’d be surprised how many pot businesses fall short. Do the basics. Make sure the waiting area is clean and has comfortable seating. Offer pre-rolls that are rolled professionally. And, of course, know your product inside out.
This is a defining moment in the emerging Colorado marijuana industry. The consumer base is still anyone’s for the taking. So, even if everybody isn’t getting stoned, there’s no denying that the times they have a-changed, and the cannabis business is ripe for the picking.
Mike Kennedy is a staff writer for Atomic20 (A20) — Atomic20, a Sponsoring level member of NCIA since August 2014, is a full-service marketing agency and shared creative workspace in Boulder, Colorado. In mid-2014, A20 assembled a qualified team of MJ marketers and research experts to serve the rapidly growing needs of the cannabis industry. With a local network of 85 top designers, developers and researchers, A20 has the ability to curate the perfect team for its clients with a focus on dispensaries and MJ brands.
Guest Post: Say It Right – Colorado’s Retail Cannabis Advertising Regulations
By Jeff Cohn, CEO of COHN
With the Colorado market looking to reach $1 billion in sales this year, as well as Oregon and Alaska joining Washington and Colorado in regulating retail marijuana sales, the cannabis industry is exploding at unbelievable rate with no end in sight. With so many landmines to navigate in this nascent industry, we wanted to simplify the legal jargon for the Colorado advertising regulations in a quick reference guide. We hope you find this resource useful in building your brand while abiding by the regulation nuances.
Jeff Cohn is CEO of COHN, Inc., a sponsoring member of NCIA since October 2014. COHN is a Denver-based integrated marketing firm with a passion for contributing their years of retail and service business marketing experience to the cannabis industry. With COHN’s expertise, they are well positioned to help expanding businesses grow their brand and recognition.
MONDAY NIGHT: U.S. Reps. Jared Polis & Dina Titus Join NCIA Members for Denver Reception
We are pleased to announce that Congressman Jared Polis (D-CO) and Congresswoman Dina Titus (D-NV) will be joining NCIA’s pre-conference cocktail reception on Monday, October 27, during our Infused Product & Extraction Symposium in Denver! The reception is open to all registered attendees of the symposium, and in appreciation for our members’ support throughout the year, it is also open to all NCIA members, even if you’re unable to attend the full symposium!
Congressman Polis and Congresswoman Titus will be in attendance to learn more about the problems facing the industry from those directly involved and share updates on the legislative landscape surrounding cannabis in their respective states.
The reception will be held from 6:00 to 9:00 p.m. at the Hyatt Regency Denver Tech Center in Denver and is only open to NCIA members, their invited guests, and registered attendees of the Infused Product & Extraction Symposium. Each NCIA member business may send up to two representatives or guests to the reception at no cost; additional guests of members will be admitted for $40 each.
Light appetizers and a hosted bar will be provided by NCIA.
Colorado Member Reception
at
Infused Product & Extraction Symposium
Monday, October 27 – 6:00-9:00 p.m.
Hyatt Regency Denver Tech Center
Denver, CO
If you are a member of NCIA, we hope you’ll join your fellow industry leaders for this complimentary event to connect you with cannabusiness professionals while learning more about the work NCIA is doing on your behalf in Washington, DC.
If your business is not yet a member of the cannabis industry’s trade association, you can join online now and then register for the event for free.
ARE SINGLE-SERVING EDIBLES THE HOTTEST TREND IN THE CANNABIS INDUSTRY?
The big news coming out of the cannabis industry this week is the rise of single-serving edibles and infused products aimed at new marijuana users, many of whom choose edibles over more traditional methods like smoking.
A national Associated Press story highlighted the “Rookie Cookie” from The Growing Kitchen as well as the new Dixie One Watermelon Cream soda from Dixie Elixirs. Each of these products boasts a modest 10mg and 5mg dose respectively and are marketed at new customers who are interested in trying edibles but who may lack the experience to properly dose the product themselves.
According to Taylor West, Deputy Director of the National Cannabis Industry Association, this is just good business given the shifting market.
“This is a great example of how a legal, regulated market can help address some of the concerns we’ve seen in terms of edibles. From new cannabis customers to medical patients, consumers exist all along the spectrum. It’s simply smart business to create products that serve a diverse market.”
Indeed, new statistics seem to back up that claim. For the second month in a row, adult-use sales figures have exceeded medical in Colorado and the trend only seems to be growing. Tourism is also playing a role. A recent market study released by the State of Colorado estimated that 40% of consumers in Denver are tourists. In ski towns, that figure jumps to 90%.
When things change as fast as they do in the cannabis industry, it pays to stay ahead of the curve. Sign up today for the Infused Products and Extraction Symposium on October 27-29 in Denver to gain insight and network with leading industry experts and businesspeople.
Guest Post: Child-Resistant Marijuana Packaging – Better Safe Than Sorry
While the legislative landscape in the cannabis industry continues to evolve both locally and nationally, one element that seems consistent is the need for producers and marketers of cannabis-related products to act responsibly in protecting children from unintended access to their products, and for good reason. Though less likely that a child under the age of five would have the desire or wherewithal to consume a harmful quantity of a floral-based product, the compelling nature of some of the edible offerings such as candies and cookies makes the likelihood not a matter of if, but when. And considering the potential liability, purveyors of such products would be wise to take every precaution as it relates to packaging.
Child-resistant packaging dates back to 1970 when after a series of accidental overdoses, Congress passed the Poison Prevention Packaging Act of 1970 and along with it, specific protocol testing to validate the functionality of child-resistant (CR) packaging. As time evolved, additional products deemed dangerous to children such as insecticides and pesticides were also added, and in 1995, the protocol testing was modified to include a ‘senior-citizen component’ as many of them found current forms of CR packaging difficult to open. When considered along with the oversight from the Consumer Product Safety Commission (CPSC), the governing body for determining what requires CR packaging, this legislation has served both industry and citizenry effectively since inception.
It is well documented that when Colorado began offering recreational marijuana products, there were few packages well-suited for the industry, and while a number of new offerings are in development, many products are currently packaged in the least expensive container and with some dubious CR performance or unverified claims of meeting CPSC guidelines. Indeed Colorado has put forth guidance on the requirements for the market, but prudent producers of cannabis products, especially edibles, would be wise to make purchase decisions based on the true protection the packaging affords and not on price alone. Sooner or later, it would seem, an incident will take place where this very issue will take center stage, and based on our considerable expertise in the packaging arena, we think it to your advantage to be able to demonstrate that balanced judgment (price vs. protection) and proven components were considered when choosing a CR package. Presuming this choice was made well, being able to cite components similar if not identical to those used by the ethical pharmaceutical industry should go a long way to demonstrate reasonable consideration was in fact used to protect the product from accidental ingestion by a child.
A quote often noted by the CPSC is that “child-resistant packaging is not child-proof packaging and as such the components should be considered the last line of defense.”
Scott Simpson is Vice President at TricorBraun XpressPak, a Sponsoring level member of NCIA since July 2014, based in St. Louis, MO, with an office in Aurora, CO. TricorBraun, launched in 1902, has grown to become a leading source of rigid packaging and related services, and has extensive experience in this packaging segment and offers assistance to NCIA members in evaluating options for current or future packages.
Join the Marijuana-Infused Product & Extraction Revolution!
The field of cannabis extraction and marijuana-infused products has quickly emerged as one of the fastest-growing and most consistently innovative sectors of the cannabis industry. It’s also become one of the most scrutinized and highly regulated. NCIA wants to help you capitalize on the infused product revolution while staying committed to the best, most responsible practices and highest quality products.
That’s why we’re hosting our first-ever Infused Product & Extraction Symposium at the Hyatt Regency Denver Tech Center in Denver, CO, from October 27 to October 29. There will be no better opportunity for industry professionals, entrepreneurs, and newcomers alike to learn about best practices and cutting-edge technologies in this booming field.
Haven’t gotten your tickets yet? Lucky for you, we’ve compiled this short summary of who should attend and why to help make your decision a little easier!
Who Should Attend?
Infused product manufacturers
Extraction scientists and business pros
Investors & entrepreneurs
Experienced dispensary owners & operators
Attorneys & legal experts
Industry consultants
Policymakers and regulators
Why Should You Attend?
Gain insight into the rule-making process around infused products regulations from industry leaders who are directly involved.
Julie will be speaking on the “Intellectual Property, Labeling, & Branding” panel on Tuesday, October 28 from 1:00-1:45 p.m.
Receive unparalleled access to thought leaders with advice on maintaining and establishing a legitimate business within the infused products & extraction sector.
You can register for a ServSafe® Food Handler workshop taking place on Wednesday, October 29 from 9:00 a.m. – 12:00 p.m when you register for the symposium.
Take a guided tour of two of Colorado’s premier infused product & extraction manufacturing facilities.
We are offering tours of both Dixie Elixirs and Auntie Dolores state-of-the-art production facilities located in Denver on Wednesday, October 29 from 9:00 a.m. to 12:00 p.m. and 1:15 to 4:15 p.m.
The morning tour is already sold-out so register now to reserve your spot!
You don’t need anymore convincing, do you? Well, just in case, we are happy to tell you that all NCIA members get a $150 discount on registration! Not a member of NCIA yet? Don’t worry! You can join today starting at the low cost of $100 a month or $1000 a year. Don’t miss this opportunity to join the first national event dedicated to infused products, while supporting the growth of a legitimate cannabis industry on the national level.
Register today for this great opportunity to connect with fellow industry leaders while learning about best practices for operating a responsible and successful infused product or cannabis extraction business.
Lady Business: Bethany Moore from National Cannabis Business Association | Ladybud Magazine
LADYBUD: You work at the National Cannabis Industry Association NCIA — what is it that you do there?
BETHANY: My primary role at NCIA is focused on membership development. I foster deeper relationships with our existing members, as well as seek out relationships with cannabis companies that are not yet a part of NCIA. I travel quite a bit for the events we do all around the country, and I enjoy that opportunity to feel the connection of this growing community from one end of the country to the other. I obviously recruit new members, but also do fun stuff like work with members to write blog posts, match members with event sponsorship opportunities, and otherwise assist in development for the organization. The future is bright and I’m honored to be in this role at this time, after years of being a volunteer activist for drug policy reform issues, when honestly, I didn’t see this whole legalization thing coming as soon as it did. I’m pleasantly surprised about the forward progress of the movement recently and look forward to helping the industry and movement progress forward responsibly and ethically.
Start Making Sense – A Cannabis Industry Fundraiser for SSDP
The National Cannabis Industry Association is proud to be hosting “Start Making Sense,” a cannabis industry fundraiser for Students for Sensible Drug Policy (SSDP) on Tuesday, September 9 at the NCIA/Vicente Sederberg offices in Denver.
SSDP, the leading student-led drug policy reform organization in the country, is currently engaged in extensive voter education and get-out-the-vote efforts in Florida to support the passage of Amendment 2. This important voter initiative, if passed, would legalize and establish a comprehensive medical marijuana program for the first time in a southern state. We at NCIA are proud to support those efforts and all of the other great work of SSDP, so we hope our members and supporters will join us for this very special evening of music, food, and drinks while supporting sensible reform.
We wanted to throw this event not only to support our friends at SSDP but also to show our appreciation for our dedicated Colorado members who have been helping lead this burgeoning industry and supporting NCIA’s phenomenal growth over the last few years. Colorado has been a focal point for reform and helped set the example for responsible business practices. Now we invite our Colorado members to help this industry grow in an state where support is still very much needed.
We will also be hosting a silent auction throughout the night with multiple signed art prints from Black Ink, a Philadelphia-based art and design company founded by former SSDP members. They have been longtime supporters of SSDP, donating their design skills over the years to SSDP’s live-music-based program, the AMPLIFY Project. Their ongoing collaboration, the “Prints Not Prisons” Art Drive, has raised hundreds of dollars for sensible reform throughout the years. (You can view a full catalog of their work here.) Black Ink’s surrealistic style has been a huge hit among live music fans and is sure to gain some new fans during our event.
For musical entertainment we will be screening the landmark concert film “Stop Making Sense” by the Talking Heads. The movie will be projected onto the front side of our office building (better known as the Cannabis Cottage), so attendees can enjoy the last few days of summer outside before Colorado begins its annual cool-down. The inside of the Cannabis Cottage will be transformed into several themed networking rooms, each featuring different music and decorations to indulge your varied musical taste buds.
We aren’t skimping when it comes to food either! NCIA staff will be cooking up pork shoulder and beef brisket all day long (as well as a veggie option) so no one leaves with an empty stomach. In addition, a selection of fine Colorado microbrews will be on tap, along with a local wine selection and other non-alcoholic refreshments.
We hope you’re excited to join us for an evening supporting sensible reform while enjoying each others’ company and timeless music. Everything will be provided, but we are strongly urging all attendees to donate the suggested $40 for admission. Every dollar you contribute will have an exponential effect and impact on the spread of sensible reform. Please REGISTER TODAY and we’ll see you on Tuesday!
Cannabis & Community: The Industry Gives Back to Medical Research and the Arts
The National Cannabis Industry Association was founded in order to foster a legitimate, responsible, and socially-engaged cannabis industry. We continue to advocate for these values both within the industry and to the outside. As part of this ongoing message, we encourage our members to engage with their communities and support charities in addition to the marijuana policy reform efforts that advance the industry directly. Cannabis businesses that engage in philanthropy are not only helping important causes and earning a tax deduction — they are demonstrating tangible benefits of legally regulating cannabis businesses to policymakers and the public. After all, criminal drug dealers don’t usually give back to their communities.
Voter support for legal marijuana is at an all-time high but a lot of work still needs to be done before public perception and the legal environment reach the point where the cannabis industry is treated like any other legitimate American business sector. Successful cannabis businesses can help move us in the right direction by publicly supporting mainstream causes that resonate with the general public in addition to helping lay the foundation for a culture of corporate responsibility within the emerging industry.
Colorado’s burgeoning legal cannabis industry is leading the charge on this front with two great examples of philanthropic activity this summer.
NCIA director of education and events Brooke Gilbert (left) poses with director of government relations Michael Correia (right) at this year’s Clinic Charity Classic.
On August 16 the Clinic Marijuana Center held its 5th Annual Clinic Charity Classic, a golf tournament benefitting the Multiple Sclerosis Society. The sold-out tournament was sponsored by dozens of cannabis businesses — including NCIA — and raised over $80,000 for the M.S. Society’s Colorado-Wyoming Chapter.
Our support for these important community benefits strengthens our relationship with those who may not have any direct experience with cannabis or the industry and generates positive news coverage across the nation.
Let us know how your business is engaging with your community in the comments below or tell us if you have an idea for new ways to get philanthropically involved.
DEBATE: How has marijuana changed Colorado’s image? | 9NEWS Denver
DENVER – A new NBC News-Wall Street Journal poll finds a majority of Americans support legislative efforts to legalize marijuana.
Fifty-five percent say they would support laws in which adults 21 and older are allowed to buy limited amounts of marijuana for personal use.
About a quarter would not approve of legalizing marijuana, but they wouldn’t actively oppose it either. Nineteen percent would actively work to oppose and overturn any legalization efforts.
There is no question that marijuana has changed Colorado’s image. Whether that’s for the better or worse is still up for debate.
“To the extent that the cannabis industry has changed Colorado. I think Colorado has even more changed the image of cannabis industry. We are showing the world that there is a sensible alternative to the underground black market for marijuana by taking it off the streets, out of the underground and putting it behind a highly regulated counter,” Taylor West of the National Cannabis Industry Association said.
Good Chemistry bring Colorado experience to Worcester medical marijuana dispensary | MassLive.com
WORCESTER — Medical marijuana is coming to Worcester’s canal district at 9 Harrison St, care of the Colorado medical marijuana dispensary Good Chemistry.
The company was one of two that received medical marijuana licenses in Worcester County Friday. It will be setting up shop at 9 Harrison St. between Water and Green Streets in Worcester’s canal district.
The Colorado company has two medical marijuana dispensaries located in Denver where they cultivate and dispenses marijuana, according to an informational folder that was given to MassLive. The company has 26 employees and grows over 60 strains of marijuana.
The storefronts in Denver have the atmosphere of a 1940’s apothecary, according to the company. The store is designated by a single lowercase “g” above the doorway. In addition to the storefront on Harrison Street, the company will also have a growth facility at another location in Worcester.
Colorado Pot Smokers Can Still Be Fired For Failing Drug Tests | BuzzFeed
DENVER — Brandon Coats was working as a customer service representative for Dish Network when he was given a random drug test in spring 2010. Although he had worked there for three years, the company fired him when the 30-year-old quadriplegic tested positive for marijuana.
Coats — who has used a wheelchair since age 16 after a car he was riding in crashed into a tree — says he uses marijuana to control his muscle spasms, which weren’t alleviated by other pharmaceuticals.
“It’s a matter of need, and not a matter of want,” Coats’ attorney Michael Evans told BuzzFeed of his client’s marijuana use.
Coats sued Dish Network, arguing that his medicinal marijuana use was legal and that he was never impaired while working, but the trial judge quickly dismissed the case.
Last April, the Colorado Court of Appeals upheld Coats’ firing in a divided opinion.
The court decided Colorado’s Lawful Off-Duty Activities Statute, which prohibits employers from firing employees for participating in legal activities during their free time, like gambling or drinking alcohol, doesn’t apply to marijuana. For the judges, the fact that marijuana is still a federal crime means it is unlawful across the board and the protections of the law don’t apply.
How to plan your Colorado “weedcation” like a responsible grown-up | Quartz
Visitors to Colorado are now welcomed at dozens of marijuana dispensaries, where they can buy up to a quarter ounce (7 grams) of pot for their own consumption. The new boom in weed tourism has meant long lines at Denver’s dispensaries, and a nascent but growing industry of packaged “green tours,” that are heavy on smoke-filled “magic bus” trips to local growers.
But what if you want to plan an upscale and, yes, responsible “weedcation” of your very own, taking full advantage of Colorado’s amazing outdoors and a serious foodie scene? Quartz asked police and people in the hospitality and cannabis business in Colorado their advice.
First Legal Sale of Marijuana for Adult Use Highlights Benefits of a Regulated Market
At 7:30 a.m. on New Years Day, dozens of members of the media, marijuana policy reform advocates, elected officials, and business leaders crammed in the cavernous lobby at 3D Cannabis Center while hundreds of eager shoppers waited outside in the snow for their chance to participate in the historic day when cannabis was first sold legally, regardless of medical status, in the post-prohibition era.
The press conference, orchestrated by the National Cannabis Industry Association, the Marijuana Policy Project, and Sensible Colorado, highlighted the social, economic, and health benefits of selling marijuana through a regulated market. Speakers Betty Aldworth, Mason Tvert, and Brian Vicente — the leaders of Colorado’s Amendment 64 campaign — highlighted some of the actual and protected benefits of Colorado’s tax-and-regulate system for adult use marijuana, including plummeting arrest case filings, significant sales contributing to a vibrant market, and the resulting tax revenue.
The press conference was immediately followed by the world’s first legal sale at 3D Cannabis Center, an NCIA Founding Member. Toni Fox, 3D’s owner, conducted the sale to Sean Azzariti, a combat veteran suffering from PTSD who knew cannabis could help him but was previously unable to access it legally.
Following the sale, NCIA members and staffers spent the remainder of the day visiting other adult-use marijuana establishments around the city where long lines full of happy customers snaked around buildings. In the first day of legal sales, it is conservatively estimated Colorado’s 37 open stores conducted well over $1 million in sales. Most observers intend to revise adult use and medical marijuana sales projections for 2014 upward from original estimates of between $400 and $600 million.
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Colorado currently has the strictest residency requirements for ownership of marijuana establishments in the United States, imposing a two-year residency requirement for any owner of a licensed business. In addition to the constraints imposed by such a lengthy residency requirement, the Colorado Marijuana Enforcement Division (the “MED”), which is the regulatory body concerned with the marijuana industry, takes a broad view of what constitutes ownership (e.g., guarantying the debt of a licensed entity can constitute ownership). Earlier this year, on May 11, 2016, in order to address the funding difficulties created by the strict residency requirements (note that because the changes to the residency requirements apply to both medical and retail marijuana businesses, this article will not distinguish between the two when discussing the legislative changes and will simply refer to licensed entities, which shall mean both medical and retail licensed entities), the Colorado Senate passed Senate Bill 16-040, as amended by the House, commonly referred to as the “Residency Bill” (the “Bill”). The Bill was subsequently signed into law by Governor Hickenlooper on June 10, 2016. The Bill, which goes into effect on January 1, 2017, will radically change the residency requirements imposed on licensed businesses. These changes are addressed in detail below. This article, with limited exceptions, only addresses the changes explicitly described in the Bill and does not address the further complexities raised by draft rules promulgated by the MED regarding the Bill since these rules are not yet final.
One additional major change in the Bill is the allowance for commercially reasonable royalties to be paid to Indirect Beneficial Interest Owners. As the law currently stands, a royalty would be considered a form of ownership by the MED (as the royalty would likely be based on the profit of the licensed entity) and would thus make the recipient of the royalty subject to residency and other ownership requirements. In addition, the current system requires all of the Owners to be present at MED meetings—which presents a major obstacle to the operator of a licensed business who wants to enter into multiple licensing agreements since any licensor could potentially put a license at risk by refusing to attend a meeting or by committing a bad act. However, Indirect Beneficial Interest Owners, while still subject to background checks, are not subject to residency requirements or the limitation of 15 natural persons (as is the case for Direct Beneficial Interest Owners when one or more equity holders does not meet the one-year Colorado residency requirement). It may also be the case, though we will need to wait for the final rules, that removing an Indirect Beneficial Interest Owner is easier than removing a Direct Beneficial Interest Owner from a license. 
When I was cooking, the Bay Area was home to a new sustainability movement that focused on local ingredients. Pioneering chefs like 
At a recent event, I spoke with a woman about her catering services, a service that pairs fine dining with smoked flower. When I asked about using cannabis as an ingredient, psychoactive or not, she said it was “too dangerous.”
Mountain Medicine recently became the first edibles company to co-brand with a mainstream (non-cannabis) food manufacturer. On my constant hunt for the best local ingredients, I discovered 
Jaime Lewis has more than nine years of experience managing the production of medical marijuana-infused products (MIP), as well as all facets of managing and operating a medical and recreational marijuana dispensary. A California Culinary Academy graduate, she’s worked in many highly acclaimed kitchens, including serving as the executive chef of a Michelin-rated three-star restaurant in San Francisco. She began creating medical marijuana edibles for HIV/AIDS patients in California in 2006 as part of a Compassion Co-op.
As the seasons change, so does the amount of light that enters into your greenhouse. Summer months may offer an abundance of natural light; however, the longer nights of winter require supplemental lighting for growers to achieve the best yield possible from their crop. Some greenhouse facilities shut down during the winter months due to natural lighting restraints, but there are easy solutions that can mean more harvests and bigger profits for growers. The first step is to target a daily light interval (DLI) number for each facility and design the supplemental light accordingly. This ensures optimal light intensity and uniformity in the facility year-round. 
For example, at urban-gro, once we know the facility’s DLI and obstructions within the greenhouse structure, we begin the planning process and consider technical factors for the layout of the lighting system. Ensuring optimal lighting layout for the grow facility is the top priority. Incorporating lights into the structure so they create minimal shadowing is critical; this ensures that the crops are getting the optimal amount of natural light when the sun is shining. 
former SSDP members. They have been longtime supporters of SSDP, donating their design skills over the years to SSDP’s live-music-based program, the 
