Culture B2B Q3 2016 by Culture Magazine

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contents

inside

Q3.2016

features

Cannabis Patents and the Battle for Control Attack of the killer cannabis patents—war or peace?

From Civic Affairs To Cannabis Affairs Former Mayor Chris Brown expresses his transition from local politics to furthering careers in the cannabis industry.

Taxing Issues Cannabis businesses are at a disadvantage when it comes to business taxes, and Tax Code 280E only perpetuates the struggle. Let’s break it down.

Pharmaceutical Embrace Successful CBD tests are yielding positive results, and raising stocks for companies like GW Pharmaceuticals in the process.

The Meaning Of The Merge Washington State’s Senate Bill 5052 has officially merged medical and recreational cannabis businesses—what’s next?

Industry Insider Nathan Todd of Cali Crusher and Windship Trading Co. has had a tumultuous and rewarding journey to success.

Preserve And Protect Learn how cannabis companies can protect themselves in the face of a wrongful death lawsuit.

18 22

departments 4

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8 News Bytes

10 By the Numbers

32 Legal

36 Liner Notes

38 Trends

40 Tech

44 Product Highlights

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Publisher Editor-In-Chief

Jeremy Zachary Evan Senn

associate Editor

Ashley Bennett

Editorial assistant

Jamie Solis

Editorial Contributors

Benjamin M. Adams, Marguerite Arnold, David Branfman, Esq., Hilary Bricken, Natasha Guimond, Todd Mathews, Nicole Potter, Jamie Solis, Addison Herron-Wheeler

Art Director

Steven Myrdahl

Production Manager

Tommy LaFleur

Graphic Designers Account Executives

general Manager Office Assistant

Meilani Darby, Tanya Delgadillo Rob Bayless, Jon Bookatz, Eric Bulls, Kim Cook, Cole Garrison, Gene Gorelik, Teddy Helms, Emily Musser, Beau Odom, Justin Olson, Chris Thatcher Iris Norsworthy

Angelina Thompson

digital media Editor

David Edmundson

Distribution Manager

Cruz Bobadilla

CultureB2B Magazine® is published quarterly and distributes 20,000 copies at over 6,000 locations throughout the United States and Europe. No articles, illustrations, photographs, or other matter within may be reproduced without written permission. CultureB2B Magazine® is a registered trademark. All rights reserved.

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NEWS

BYTES New Cannabis Testing Labs Come to Juneau, Alaska

$1 Million Investment to Fund Cannabis Café in Texas A $1 million investment by North American Cannabis Holdings, Inc. (USMJ) will go toward funding a cannabis café in Houston, Texas called AmeriCanna Café, according to PR Newswire. USMJ first announced its plans to build its flagship café in June 2015. The company then purchased a successful health and fitness smoothie café in Dallas, Texas, which brought years of industry experience, and also brought in close to half a million dollars in annual retail sales. AmeriCanna Café will not only serve up cannabisinfused beverages, they will also have trained staff to help customers order by explaining the benefits of hemp-infused coffees, juices and smoothies. The café will also serve up raw hemp seeds, and other foods with hemp extract. THCinfused beverages will only be added to the menu when doing so is permitted by state and federal law. This milliondollar investment will allow AmeriCanna Café to finalize its property acquisition in Frisco, Texas.

When it comes to cannabis, there are various necessary requirements to have a successful medical or recreational industry. One of these working parts is professional cannabis testing facilities. Alaska’s current cannabis legislation requires all cannabis to be tested by a professional, state-licensed testing laboratory. So far, the city of Anchorage has two state-approved labs, leaving all other areas of Alaska out of luck, until now. Luckily for the citizens of Juneau, cannabis testing labs are coming to the state’s capital. According to Alaska Marijjuana News, the manager of Southeast Alaska Laboratories LLC, Jessica Dreibelbis said, “We just saw the need and thought it would be a great venture.” The lab hopes to get its conditional-use permit soon. There are an additional four applications by cannabis testing labs currently being reviewed by Alaska’s government, two of which would operate in Juneau.

Google to Enter the Cannabis Industry Google, the wildly successful American technology company, may be planning its entrance into the cannabis industry, according to Ganjapreneur.com. LivWell Enlightened Health is a large cannabis company based in Colorado. At a party for Congressman Jared Polis, the CEO of LivWell, John Lord, announced that Google had contacted him to inquire about working together in the future. Google reached out to Lord and his company shortly after Microsoft announced it would be partnering with Kind Financial to provide governments with the ability to track cannabis commerce. A spokesman from LivWell, Matthew Givner, confirmed Lord’s claim in an email to Marijuana Business Daily. Givner explained that Google reached out to see if LivWell was interested in discussing the current needs of the cannabis industry and how Google could work with LivWell to address such issues; however, that is the last time they had communicated with Google. At this point it does not appear that any plans have been confirmed for the two companies to work together, but only time will tell.

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NEWS

Recreational Cannabis Could Bring an Estimated $630 Million to Nevada by 2020 The 2016 Nevada Legal Cannabis Market State Profile was released by New Frontier and Arcview Market Research. The profile contains an official market projection that shows legal cannabis sales in the state of Nevada could make an estimated $630 million by the year 2020 if the state legalizes recreational cannabis this November. The Founder and CEO of New Frontier, Giadha DeCarcer, told Yahoo! Finance that the legalization of cannabis for adult use in Nevada would have a huge financial impact, because the state already thrives from entertainment and tourism. The CEO of The Arcview Group, Troy Dayton, also commented on how cannabis could benefit the state, “2016 is poised to be the tipping point for the cannabis industry. Nevada is just the beginning of the significant opportunities for investors and entrepreneurs to lay ahead in the sector, especially given its top tourist destination rank.” The initiative to regulate and tax cannabis for adult recreational use will be on Nevada’s ballot this November.

Maryland Gets Ready for Medical Cannabis Dispensaries Maryland is currently reviewing applications for cannabis dispensaries, growers and processors to operate within the state. According to The Baltimore Sun, Maryland Medical Cannabis Commission (MMCC) has received 1,081 cannabis-related license applications. To be specific, there were 811 applications for dispensary licenses, 146 for grower licenses and 124 for processor licenses. The areas in which most dispensary applications are being submitted are the cities and counties with the densest populations. This means that Baltimore City, Ellicott City, Frederick, Rockville and Towson have the most dispensary license applications. Most of the cannabis license applicants were submitted by residents of Maryland; however, there are a handful of applications from other states like Arizona, Colorado and Illinois as well. According to the MMCC website, the commission hopes to see medical cannabis available to Maryland’s patients before the year is over.

VI Latin American and I Caribbean Conference on Drug Policy WHAT: VI Latin American and I Caribbean Conference on Drug Policy. WHEN/WHERE: Wed, Oct. 5-Thurs, Oct. 6. Crowne Plaza Santo Domingo, 218 George Washington Ave., Santo Domingo, Dominican Republic. INFO: Visit conferenciadrogas.com for details.

This conference will focus on the contradictions, conflicts and tensions that arise because of drug policies. The use and production of drugs around the world is very complex, as it affects and is affected by history, culture and economics of each country. Latin America in particular faces income disparity, poverty and social inequality, and there are many reasons these negative consequences can be linked to drug policies. Some of these include a

huge number of drug users and small drug dealers facing incarceration, as well as social violence, violations of human rights and more. Various speakers and panels will be present discussing the inequalities of drug policies, including that of cannabis, as well as forward-thinking ways to eliminate the many social injustices that many Latin Americans currently face. Check the event’s website for updated information on the conference’s program, panels and speakers.

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NEWS

The amount of money, in billions of dollars, that was made in legal cannabis sales in 2015 by states that have legalized either medical cannabis or recreational cannabis: (Source: CSP Daily News)

5.4

The amount of money, in billions of dollars that Europe spends on cannabis each year: (Source: Deutsche Welle)

The estimated number of cannabis retailers in Colorado that are ordering infused products through a new online ordering platform: (Source: PR Newswire)

10.2

100

The amount of money, in millions of dollars, held by a private equity fund launched by California-based cannabis management company MedMen: (Source: Los Angeles Business Journal)

The approximate amount of square footage contained in a Northern Oregon industrial warehouse that has been purchased by legal cannabis firm Greenspace: (Source: Portland Business Journal)

100

40,000

The number of cannabis import permits obtained by Real Scientific Hemp Oil-X TM that were approved by the Mexican government to be used to treat adolescents suffering from epilepsy: (Source: Market Wired)

The estimated amount of money, in millions of dollars, that the Nevada medical cannabis sales are projected to hit by 2020: (Source: Yahoo! Finance)

630

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The approximate percentage of executives in the legal cannabis industry who are women: (Source: The Atlantic)

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Attack of the Killer Cannabis Patents!

War or Peace? by David P. Branfman

Almost 40 years ago—in the Grade B horror spoof Attack of the Killer Tomatoes—vicious, giant man-eating tomatoes of unknown origin were seen spreading mayhem and trying to take over the U.S. This was right around the time the term GMO was first working its way into our vocabulary. Flash forward to now, and recently we have heard quite a few concerns and fears about whether companies like Monsanto are going to take over the cannabis industry by buying up seed companies and by using their patents to squash the small grower. While trying to predict the future in the cannabis industry is extremely difficult, since change seems to occur at an accelerated pace and there are more knowns than unknowns, our instincts tell us that the future of cannabis is more likely to follow the patterns in the craft beer industry this last decade. For the most part, small craft brewers have been able to stay true to themselves and their loyal customers and not be taken over by the beer giants. What we do know is that cannabis entrepreneurs both small and large have already started to file for and obtain patents for a variety of inventions. Like the Paul Simon song “One Man’s Ceiling is Another Man’s Floor,” one’s view of whether this is “good” or “bad” largely depends on whether you believe inventors need to protect their large investment in their cannabis enterprise by obtaining some form of intellectual property (IP) protection. This article will provide

“In one of the most striking ironies yet in the world of cannabusiness intellectual property, the U.S. government actually owns a patent for the use of cannabinoids for treating a wide variety of ischemic diseases.” a representative sample of some of the cannabis-related patents that have already been filed for or obtained.

Some Typical Cannabis-Related Patents Background: A patent is a government grant of the exclusive right to sell, produce, market or use an invention for a set period of time. Patents are granted by the U.S. Patent & Trademark Office (USPTO) to applicants who comply with a strict set of requirements. And despite a blanket ban on granting cannabisrelated trademark registrations, the USPTO doesn’t seem to follow the same ban when it comes to granting cannabis-related patents. Having said that, being granted a patent doesn’t mean that you are entitled to sell the invention; depending on the invention, that is likely to still be illegal under federal and some state laws.

There are basically three types of patents: Utility Patents: These patents cover inventions and devices that are functional and novel. Examples include devices for smoking cannabis, processes for extracting and purifying cannabis and its key ingredients, medical uses for cannabis and other technologies related to the use of cannabis, whether medicinal or otherwise. The general rule is that the term of protection for a utility patent is 20 years from the date of filing of the application. Examples include U.S. Patent No. 8,906,429, which covers medical cannabis lozenges and compositions thereof and is particularly interesting because it covers a method of optimizing the therapeutic effects of CBD and balancing them with the psychoactive effects of THC through the use of a sublingual medicament (essentially a lozenge).

A large British pharmaceutical company, GW Pharma, owns approximately 35 cannabis-related patents. These inventions range from using cannabinoid plant extracts to act as neuroprotective agents to pharmaceutical formulas containing cannabis to electronic delivery devices and containers.

Design Patents: A design patent protects the ornamental and aesthetic portion of an invention—not the functional features. Example: The shape of the green Perrier bottle. A design patent can include the unique visual and aesthetic portions of a pipe, bong or other useful item. There is some overlap between design patent and trade dress rights—but that is the topic for another article.

Plant Patents: Plant patents protect new and distinct varieties of plants that are invented or discovered and asexually produced. But also note that plants that are sexually produced may be protected under the Plant Variety Protection Act of 1970, which is similar to a plant patent granted by the USPTO. However, the requirements differ greatly, as do the limits of protection. A plant patent was granted by the USPTO late last year: Patent No. 9,095,554 entitled “Breeding, Production and Use of Specialty Cannabis.” It appears to be broader than just a single strain of cannabis; but it is not broad enough to cover every strain of cannabis or even most strains. In general, this patent claims strains with a CBD content greater than three percent plus a terpene profile where myrcene is not the dominant terpene. >>

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The Elephant in the Room

In one of the most striking ironies yet in the world of cannabusiness intellectual property, the U.S. government actually owns a patent for the use of cannabinoids for treating a wide variety of ischemic diseases. Patent No. 6,630,507 (issued in 2003) is entitled “Cannabinoids as antioxidants and neuroprotectants” and was assigned to The United States of America as represented by the Department of Health and Human Services. This is somewhere between ironic and sheer hypocrisy since the U.S. government continues to treat cannabis as a Schedule 1 drug under the CSA that has no medical benefit whatsoever.

Conclusion

While there is a great deal of concern within the cannabis community whether patents will be used by businesses to squash small entrepreneurs and diminish the supply of medicine to the patients who need it most, it appears that it is not a question of whether cannabis-related patents should be granted. Rather it is a question of whether the owners of cannabis-related patents will use their patents to squash competition or simply to protect their substantial investments in their inventions. Only time will tell for sure. But efforts to obtain patent rights are already here and they need to be addressed—not ignored or feared. d

Oregon Medical Cannabis Patients Reporting Each Qualifying Condition

Source: Oregon Health Authority

61%

Severe Pain

18%

Persistent Muscle Spasms

Nausea PTSD

Cancer

Seizures, Including Epilepsy

Cachexia

Glaucoma

HIV+/AIDS

Alzheimer’s-related Agitation

0% 14

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20%

40%

60%

80%

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Changing Tides Former California Mayor Chris Brown turns cannabis consultant by Addison Herron-Wheeler

Former Hawthorne, California mayor Chris Brown has a unique story that will probably be commonplace soon among entrepreneurs and politicians alike. Although he started his career in politics, he is now a cannabis consultant, and makes a living advising politicians and lawmakers on how to deal with those in the cannabis industry, and vice versa. This kind of middle man helps facilitate communication between two groups that can either cooperate well to promote growth, or cause a lot of issues for each other. Recently, CULTURE B2B caught up with Chris Brown to discuss his transition and what he does every day to help the cannabis industry.

Why did you choose to go from a career in government to a career working with cannabis? Well, you know, I knew a lot of cities were facing financial deficits throughout the nation, especially in California, and I knew cannabis was heading in the direction where it would be legalized

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recreationally. Cities need to know it has more benefits than just financial; it helps cancer patients and veterans who need it as medicine and brings extensive revenue to communities.

How do you balance working with so many different organizations and people involved in the cannabis conversation? I work with the Foxx Firm, where I am a Chief Marketing Officer. I get municipalities to start the conversation regarding cannabis. I also help small businesses and individuals, whether it’s with cultivation and delivery or a new dispensary looking to open up. I allow them to set up a legal business within the city limits.

What are some of your biggest achievements so far in the realms of cannabis consulting? I helped two major developers get licenses in Cali, and I am on the

brink of helping two other companies from the Colorado area and also the Chicago area get licenses in California. I don’t want to disclose their names and information yet, but things are going well so far.

What do you say to those who are still wary about legal cannabis? I would say get on board. This is prohibition—it happened more than 90 years ago with alcohol; now it’s happening with cannabis. Cannabis is from the earth, and it can be beneficial for individuals who are using and not abusing cannabis. It can help their mind, body and spirit. It has been documented that it can help fight eight different forms of cancer.

What are your goals for the next few years as a cannabis consultant? To get as many larger companies that create jobs

for local municipalities in California. Right now, California is poised for new licenses, and I want to bring in businesses throughout the nation to create local jobs for cities. The main things most mayors and city councilors are asking for is local jobs, and getting revenue for local municipalities.

What would you like legal cannabis to look like in 10 years? I would like legal cannabis to more or less look like the medical industry, and to be helping and benefiting everyone, not just people on the recreational side, but definitely on the medical side. I’ve experienced cancer in my family, and it’s something members of my family have been battling for years. Many people use cannabis if they have cancer to soothe their ailments, and while we can’t say yet that it has cured any cancer, it has been shown to stop the growth of several kinds of cancer.

photo courtesy of CHRIS BROWN

of being that middle man between the local officials and the municipality. We need a lesion to soothe the process, the bureaucracy of government. I know sometimes it takes a long time, but coming from the government side over to the consulting side, I make that transition smooth.

“Many people use cannabis if they have cancer to sooth their ailments, and while we can’t say yet that it has cured any cancer, it has been shown to stop the growth of several kinds of cancer.”

Why do you think it’s necessary for people to work with consultants? You may have someone who has been around the cannabis industry for a long time, but they haven’t necessarily done everything the right way. You may also have larger businesses coming in that need help on the business side and the government side. Other consultants should look into being a cannabis consultants, because there is a need.

What are some of the biggest challenges you’ve faced in your line of work? Initially, it was perception. Going from mayor to marijuana was not easy, but after closing my first few deals, that helped to smooth the transition. Perception is the biggest issue.

Is there anything else you’d like to add? It is very important to get licensed. Within the next two years, if you are doing anything that is illegal, there will be a Class D felony attached to your name, so getting license should bed your main objective within the next 18 months. d

Describe what you do. What does a typical day look like for you? Waking up, seeing what the client needs from the local municipality, and kind

MArket Size

Nevada Legal Cannabis Market Growth $700.000.000 $600.000.000

Compound Annual Growth Rate (*16-*20) 51%

$500.000.000 $400.000.000 $300.000.000 $200.000.000 $100.000.000

2015

2016

2017

2018

2019

Medical Use

2020 Adult Use

Source: New Frontier Reseach & Analysis

Cannabis Science Conference This annual event focuses on bettering the science of cannabis by bringing together cannabis industry experts, physicians, policy makers, researchers and scientists, as well as those interested in cannabis science. This two-day conference will be jampacked with exhibitions, keynote speakers, informative presentations and engaging discussions. The keynote speakers at this one-of-a-kind cannabis event are all at the forefront of cannabis science and medicine. Don’t miss speeches by an expert in cannabis testing, the CEO of Trace Analytics, Gordon Fagras, and so many more, including Tracy Ryan, who is now the CEO of cannakids. org and has first-hand experience using cannabis for a pediatric illness and Kevin Rosenblatt, MD, PhD, who is the CSO & CMO at Companion DX Labs, whose company is responsible for developing medicine and solutions to help doctors most effectively prescribe cannabis. WHAT: Cannabis Science Conference. WHEN/WHERE: Wed, Oct. 5-Thurs, Oct. 6. Red Lion Hotel on the River Jantzen Beach, 909 N. Hayden Island Dr., Portland, Oregon. INFO: Visit www.cannabisscienceconference.com for details.

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Another Form of Prohibition Decoding Tax Code 280E by Benjamin M. Adams

Businesses in almost any other retail sector calculate gross income, deduct business expenses, and pay taxes to the Internal Revenue Service based on this relatively simple formula. Meanwhile, cannabis-related businesses are being effectively taxed out of business with unreasonable tax rates—tax rates that no business can afford. Even breaking even becomes a challenge. Is Tax Code 280E just another mechanism to shut down cannabis businesses? Tax Code 280E mandates that legally-operated cannabis-related companies must pay effectively a 70 percent tax rate. Only a few deductible tax costs, such as cultivation costs, are available for deduction. Some cannabis-related companies are reportedly paying tax rates of up to 100 percent— and that makes business nearly impossible to reasonably navigate. Businesses that are legal on a state level can, however, deduct Cost of Goods Sold (COGS), following guidance from section 263A of the Internal Revenue tax code. The IRS consummately scrutinizes employee salaries, costs and repairs, marketing costs and contractor payments when looking at cannabis businesses. Cannabis-related businesses are now challenging non-cannabis deductions such as administrative costs, state excise taxes, storage and the purchasing of cannabis. Attorney Henry Wykowski successfully convinced the court to separate legally-operated cannabis businesses from drug traffickers with the case of Californians Helping to Alleviate Medical Problems Inc. v. The Commissioner in 2007. The case sets a precedent for a number of implications—most importantly; it keeps the IRS from identifying cannabis entrepreneurs as criminals. “We are not drug traffickers,” Wykowski told CULTURE B2B in an interview. “We are approved businesses that pay taxes, create jobs with good benefits, and are responsible members of our respective communities. We had to submit applications, pass detailed investigations and operate in a manner that is in compliance with state and local regulations.” Thanks to Wykowski and other’s work, cannabis businesses

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can deduct certain non-cannabis business activities on their tax returns. In January of 2015, The IRS Chief Counsel removed additional tax deductions that cannabis businesses traditionally wrote off at tax time. Tax Code 280E goes against the will of the people in 25 states that have legalized cannabis in one form or another. A legal battle, involving Oakland’s own Harborside Health, is underway with the intention of repealing Tax Code 280E. “Harborside Health Center recently challenged the applicability of 280E in its tax trial, Wykowski continued. “We argued that it was never meant to apply to cannabis dispensaries that consisted of more than just selling cannabis, such as providing holistic services and selling non controlled substances. Keep your fingers crossed. If the court rules in our favor it will eliminate the burden imposed by 280E.”

“We are approved businesses that pay taxes, create jobs with good benefits, and are responsible members of our respective communities.”

Understanding Tax Code 280E is crucial for any entrepreneur, ancillary or not, to succeed in this business. Compliance with tax regulations is not a sexy part of the business, such as the excitement of branding a business from the ground up. The National Cannabis Industry Association (NCIA) released a white paper detailing the fine print in between the lines of Tax Code 280E. “A throwback from the Reagan Administration, Section 280E originated from a 1981 court case in which a convicted cocaine trafficker asserted his right under federal tax law to deduct ordinary business expenses. In 1982, Congress created 280E to prevent other drug dealers from following suit. It states that no deductions should be allowed on any amount ‘in carrying on any trade or business if such trade or business consists of trafficking in controlled substances’,” wrote members of the NCIA in a white paper statement. “There are some bills pending in Congress that would disallow its applicability to dispensaries in states that have legalized medical cannabis,”

added Wykowski. “We had hoped that the Internal Revenue Code would be revised during the Obama administration allowing us a shot at repealing 280E, but it did not happen. Absent is a revision, and we are stuck with it unless a bill is passed limiting its applicability.” Many cannabis-related businesses are now attracted to the idea of paying taxes in full and building a relationship with the IRS. Section 280E, according to Wykowski, removes the incentive to file tax returns in a transparent manner. The Small Business Tax Equity Act, which was introduced by Senator Ron Wyden (D-OR) and Representative Earl Blumenauer (D-OR) would specifically address the negative impact that Tax Code 280E places on cannabis businesses. S. 987 and H.R. 1855 would exempt cannabis businesses from the restrictions set forth by the IRS. Do yourself a favor and read the National Cannabis Industry Association’s white paper on Tax Code 280E. It contains information that may ultimately lead to the success or failure of your cannabis business. d

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Possible Cure for Rare Epilepsy Successful trials of cannabidiol drug raises GW Pharmaceuticals’ stock by Jamie Solis

Shares of GW Pharmaceuticals Plc, a London-based biopharmaceutical company, went up nearly 17 percent at $93.52 a share in late June, after the company announced successfully reducing the frequency of seizures for patients with a rare form of epilepsy called Lennox-Gastaut syndrome. Its latest experimental cannabis-derived epilepsy drug is called Epidiolex. In a press release, GW’s Chief Executive Officer, Justin Gover stated, “We are delighted to announce positive results in this Phase 3 trial of Epidiolex in patients with Lennox-Gastaut syndrome, and particularly pleased that this result is consistent with our recent Phase 3 pivotal data for Epidiolex in Dravet syndrome. We believe that this result further demonstrates that Epidiolex offers the potential to be a new effective therapy within the field of treatmentresistant childhood-onset epilepsies.” Gover went on the explain that the company is now moving to submit a New Drug Application to the U.S. Food and

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typically occurs in children before they are four years old. Up until this point, those diagnosed with Lennox-Gastaut syndrome rarely became seizurefree or developed normally. Other anti-epileptic medications currently prescribed for this syndrome are also largely associated with life-threatening issues like liver failure and anemia, while a small percentage of people may even face glaucoma. Having a safe treatment for children and adults with LennoxGastaut syndrome is hugely important and life changing for so many families. Christina SanInocencio is the Executive Director of the LennoxGastaut Syndrome Foundation. She stated in GW’s press release, “LennoxGastaut syndrome is such a difficult form of epilepsy to treat. Additional safe and effective treatments are desperately needed for patients who continue to struggle with uncontrolled seizures. We are thrilled with these positive results, which offer much needed hope and promise to those living with this debilitating condition.” While this is a great success for patients with Lennox-Gastaut syndrome, GW Pharma will continue to push forward with cannabis research and development of new cannabinoid drugs. The company stated on their website that they continue to find highly promising data and new intellectual property in regards to cannabis drug treatments and their many therapeutic effects. GW Pharmaceuticals is also researching an additional drug, GWP42006, which has Cannabidivarin (CBDV) as the primary cannabinoid. This cannabinoid has demonstrated antiepileptic properties, and GW Pharma is currently in the Phase 2 study with 130 patients. GW Pharmaceuticals is the same company that created Sativex, a cannabinoid medicine that helps alleviate spasticity due to Multiple Sclerosis. It is also being tested for its ability to help alleviate cancer pain and neuropathic pain. As this biopharmaceutical company continues to push forward with its groundbreaking research into lifesaving cannabinoids, we can only hope to see more consistent and positive results for people facing debilitating diseases and disorders. d

“We are thrilled with these positive results, which offer much needed hope and promise to those living with this debilitating condition.” Drug Administration (FDA) within the first half of 2017. The FDA already given GW Orphan Drug Designation for treating Dravet syndrome, infantile spasms, LGS and Tuberous Sclerosis Complex, as well as the Orphan Designation from the European Medicines Agency to treat Dravet syndrome with Epidiolex. Epidiolex is a liquid form of cannabidiol (CBD). It is currently being tested for efficacy against battling many pediatric epilepsy syndromes like Dravet syndrome, Lennox-Gastaut syndrome and Tuberous Sclerosis. According to the National Institute of Neurological Disorders and Stroke, Lennox-Gastaut syndrome is a rare and severe form of epilepsy that

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MED Uncertain

Future 22 22

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REC Washington prepares for the merge of medical and recreational cannabis markets by Nicole Potter

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Beginning July 1, Washington is officially the newest state to have a full-fledged regulated cannabis industry. The state’s new bill, Senate Bill 5052, requires the merging of medical and recreational cannabis businesses statewide, alongside the closure of all unlicensed medical cannabis dispensaries, in order to combine the two business types into one single classification. Although SB-5052 has officially taken effect, there are many concerns regarding the merger of the state’s cannabis industry and how it might affect patients and customers alike in the months to come. The new bill places cannabis businesses into a single category. If a dispensary that’s licensed to sell recreational cannabis also wants to sell medical cannabis to

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“I agree that it was a major problem that dispensaries were not licensed and regulated, and that they needed to be brought under control. But the way that they’re going about it in Washington isn’t to bring two systems together, it’s to get rid of one system.”

patients, then they must obtain a “medical endorsement” from the state. The bill also limits the total number of operational dispensaries throughout the state to 556 (only 388 had been officially accepted as of mid-June, and as of that time, 332 had received the “medical endorsement,” according to the Puget Sound Business Journal). In order for a dispensary to obtain the “medical endorsement,” they must have a licensed medical cannabis consultant on staff, be able to use the medical cannabis authorization database to qualify/register new patients, have the ability and the tools to issue patient cards, and must be able to train employees on how to use the medical cannabis database, among other requirements.

However, many are worried that these requirements will take too much time for dispensaries to implement. As a result, patients especially fear that they will be unable to have proper access to their medicine until the system gets organized. Many business owners and cannabis users alike are unsure of the success of the new regulation, “I agree that it was a major

problem that dispensaries were not licensed and regulated, and that they needed to be brought under control. But the way that they’re going about it in Washington isn’t to bring two systems together, it’s to get rid of one system,” says James Lathrop, CEO of Cannabis City located in Seattle. Aside from the time it will take to organize such a drastic regulatory change, the Washington State Health Department’s authorization database has proven problematic even before the deadline hit. The Health Department announced in lateJune that their database was encountering “software challenges” as they prepped for the transition of the new program ahead of the scheduled July 1 start date. The issuing and printing of patient cards was delayed, and some patients were unable to begin taking advantage of the benefits of the medical cannabis program. The Health Department was eventually able to fix the glitch and make the database operational once again, but at a major inconvenience to patients. With SB-5052, medical patients are not required to register with the new system, however if they do, there are many offered benefits. Registered patients are exempt from sales tax when purchasing their medicine, they may purchase three times the legal limit of cannabis allows for recreational customers, they are allowed to buy higher-THC products and can grow more than four plants at home. Washington legalized recreational cannabis in 2012 with Initiative 502, but the new bill that merged both medical and recreational wasn’t signed into law until April 2015. Although the new system is supposed to be slightly cheaper for medical patients versus prices paid by recreational customers, SB-5052 still requires that that they pay a 37 percent excise tax. At this point in time, it’s simply too early to tell how the process will play out. Although there have already been a few issues with the program’s opening that could have been handle better, here’s hoping that Washington will be able to make the new program work after its given some time to work out a few kinks. d

p h o t o b y Scott E k l u n d / R e d B o x P ict u re s

ExpoGrow ExpoGrow is a huge cannabis culture event that attracts industry experts and professionals, as well as the general public. Attendees will enjoy three days traveling about the fairgrounds’ four pavilions to meet a variety of vendors. Businesses such as seed banks, vaporizer distributors and cannabis cultivation producers, among many others, will be presenting their products. In addition to the industry’s top vendors, ExpoGrow is known for its killer music lineup with artists like Cypress Hill and Tide, which will take place in a giant circus tent this year. The entertainment doesn’t stop there however, as the festival will also have a slackline, graffiti art and other activities to participate in. Professionals will also get the chance to potentially win awards in the V Copa Cannabica ExpoGrow for various categories such as “Best Sativa,” “Top Seed Bank” as well as national and international Activist Recognition Awards. Don’t miss your chance to mingle with the industry’s top professionals while also having a great time. WHAT: ExpoGrow. WHEN/WHERE: Fri, Sept. 16-Sun, Sept. 18. FICOBA (Gipuzkoa Exhibition Center), Avda. de Iparralde 42, IRUN (Gipuzkoa), Spain. INFO: Visit www.expogrow. net/2016 for details.

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Industry Insider

Nathan Todd of Cali Crusher and Windship Trading Co.

by R. Scott Rappold

Like in any other industry, most big cannabis companies started small. Nathan Todd’s started with just him and a van. As the creator of the Cali Crusher, one of the best-selling herb grinders on the market, and the founder of Windship Trading Co., a major accessories distributor, Todd looks

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back fondly on his van days. But just as cannabis has come out of the legal closet, he has moved on from the van, even while he traces his success to the people he met and the lessons he learned hocking his wares at festivals and fairs. “It’s pretty wild to think it was me in a little van that I lived out of selling

out of a couple tubs and now I look out my window from my corner office in a warehouse and there are thousands of products out there and people running around like busy bees trying to get products off the shelves and into boxes and shipped around the country and other countries,” said Todd. “It’s pretty awesome.”

Central America to the U.S.

Todd’s introduction to the world of cannabis accessories was in the early ‘90s, when his family moved to Costa Rica and he saw all the pipes for sale in town squares. When he flew home, his friends were amazed. Except at the handful of head shops around the country and the parking lot of Grateful Dead concerts, real pipes that smoked well and looked beautiful were hard to find. “I realized I was buying these things for a couple dollars and there was clear demand for them. And by the time I was 16, I was flying to visit my friends twice a year with a bunch of clay pipes and hackey sacks,” said Todd. After moving back to the U.S. in 1995, he got to know some glass blowers and other pipe-making artisans. Soon he was selling them to stores. But this was long before the internet made shopping easier than using a phone book. So he hit the road. He wouldn’t stop for a decade.

Van Days

To help pay for his education and support his young family, Todd started a company called Festival Outfitters. Music festivals, hippie fairs and trade shows—these were where people went to find smoking paraphernalia in those days. So Todd made sure he was there, 75 events a year, with a prime booth space. During the week, he’d stop in at the local smoking accessory stores or hippie head shops, which by the late ‘90s were popping up around the country. It could be rough, living on the road, sleeping on rest area picnic tables, but he was able to cut his teeth in the industry. “It gave me an opportunity to explore that territory, to meet store owners, to develop distribution while making the retail dollar going from show to show. It was a grueling lifestyle, a strenuous lifestyle, but a lot of fun and a lot of partying. And it really did open a lot of doors,” said Todd. A decade on the road can get rough, especially with young children, so he began looking for something more stable. >>

“I realized I was buying these things for a couple dollars and there was clear demand for them. And by the time I was 16, I was flying to visit my friends twice a year with a bunch of clay pipes and hackey sacks.” CULTUREB2B.com

The Daily Grind

At the first Bonnaroo, a now-massive music festival in Tennessee, Todd had a table full of herb grinders at his booth. He remembers trying to tell people about the Sharpstone, one of the first quality imported grinders, at a time when hardly anybody had a vaporizer to make such a tool necessary. “Nobody knew what they were and it was a hard sell. I would tell people, ‘That’s the Cadillac of grinders,’ just going through all the features and trying to convince people they were a useful item,” said Todd. “Because people were like, ‘I’ve got fingers, dude. I’ve got a coffee grinder. I don’t need that.’” Todd knew he was onto something. Surely, with the rising tide of legal medical and recreational cannabis, people would understand the benefits of having fluffier, consistent product for vaporizing and smoking. After working to promote the Sharpstone, he decided to launch his own grinder. The Cali Crusher was born, with the California bear on the lid, multiple colors and a bold look, the first grinder to focus on the brand. The Homegrown brand, made in San Diego, debuted a couple years later, with magnetic locking, a unique radial tooth design and a rounded bottom chamber to catch pollen. “Before vaporizers, and still today, whenever you’re rolling a joint or a spliff or a cigarette, or whenever you’re packing a bowl, the beauty of the grinder is you can get a consistency you like for however you’re choosing to smoke the product,” he said. “Even back then, it opened up a door to people’s imagination going, ‘Oh cool,’ as opposed to, ‘I’ll just tear this up and roll it up in a paper.’” He also understood early on that legal cannabis was creating a connoisseur class of user, who wanted the next best thing and was willing to pay for it. “There’s a really a coolness to having this new hip

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“Before vaporizers, and still today, whenever you’re rolling a joint or a spliff or a cigarette, or whenever you’re packing a bowl, the beauty of the grinder is you can get a consistency you like for however you’re choosing to smoke the product.” product that your friends haven’t seen and you’re the first guy that had a good grinder . . . There’s a coolness factor to it and a fun factor to it that was really part of the development of that product.” In 2010, he started Windship Trading Co., a natural evolution of his van-based business for the internet age, selling a variety of products to consumers and stores. While he still does a few festivals, mostly events he enjoys and where he can sell some slightly damaged merchandise, his van days are over. And that’s a mixed bag. “The coolest thing about the music festival, generally that weekend in that town, it’s the weekend, the time they’re most excited about the entire year. They’re going to let loose. They’re going to spend money. They’re going to be happy and free. Every weekend, those are the people you’re around.” But at 38 years old, after a few days of that, it’s good to be home. d

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Preserve and Protect Your Company Consumer safety and wrongful death cases by Hilary Bricken

It started in 2014 with Levy Thamba, who jumped to his death from a balcony after consuming “an edible marijuana product” in Colorado. Then it was Maureen Dowd, whose experience was a little damaging PR for Colorado’s cannabis industry, but not all that harmful once people realized that she had disregarded her edible’s safety instructions. In 2015, there was the LivWell class action lawsuit, in which two plaintiffs alleged breach of warranty arising from cannabis that contained Eagle 20. And in 2016, there has already been a slew of product recalls in Denver for safety issues and illegal pesticides. Now we get the first wrongful death suit, filed against two Denver-based cannabis companies for a death caused by a man shooting his wife after consuming cannabis. In 2014, after eating a Karma Kandy Orange Ginger (a tootsie-roll type candy infused with THC), Richard Kirk shot and killed his wife, Kristine Kirk. At the time of the shooting, Richard Kirk was allegedly hallucinating and talking about the end of the world. Now, the Kirks’ three children have filed a wrongful death suit against the candy maker, Gaia’s Garden, LLC, and the dispensary, Nutritional Elements, Inc., from which Richard Kirk purchased the candy on the night of the shooting. The Kirks allege the defendant companies failed “to warn that edibles could lead to paranoia, psychosis and hallucinations” and “negligently, recklessly and purposefully concealed vital dosage and labeling information from their actual and prospective purchasers . . . to make a profit.” Kirk was charged with first degree murder and initially pled guilty, though he has now switched his plea to not guilty by reason of insanity, claiming the cannabis rendered him insane at the time of the murder. 30

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The elements of a wrongful death civil claim are typically as follows: The death of a human; Causation (actual and proximate); The survival of family members who are suffering monetary injury as a result of the death, and; The appointment of a personal representative for the decedent’s estate. Right off the bat, the biggest issue for plaintiffs will likely be causation. Plaintiffs will probably have to show some combination of the following: 1) the labels and packaging on the edible failed to adequately warn of side effects like psychosis 2) defendants knew or should have known that the allegedly inadequate labels would lead to Kirk killing his wife, or knew or should have known not to sell the edible specifically to Kirk; and 3) adequate warning labels would have prevented Kirk from killing his wife and/or that not selling the edible to Kirk would have prevented Kirk from killing his wife. I see the chances of plaintiffs prevailing in their lawsuit against the cannabis companies as slim at best, Nonetheless, the mere filing of this lawsuit will likely have ramifications for the cannabis industry and for state and local lawmakers and regulators when it comes to cannabis-infused products. I’ve spoken publicly multiple times in the past about how cannabis companies should prepare for the worst now by implementing recall plans that will help them navigate products liability, consumer safety and negligence issues and claims. And though we of course do not yet know how this Colorado case will turn out, its having been filed at all demonstrates how with legalization and normalization comes legal accountability and this will certainly not be the last cannabis wrongful death lawsuit. d

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B2B

LEGAL

From Farm to Pipe The New Cannabis Supply Chain Under California’s Mmrsa by Meital Manzuri

From a patient’s perspective, nothing really changes under California’s Medical Marijuana Regulation and Safety Act (MMRSA)— patients will continue to get their cannabis from dispensaries the same way as they do today. From the logistics side of things, however, it’s a whole new ballgame. Long gone will be the days where cannabis is grown in backyards, basements or warehouses and then sold by vendors to dispensaries with little to no paper trail. The MMRSA creates new players in the game—licensed distributors and transporters. Under the new system, cultivators and manufacturers must send all products to a licensed thirdparty distributor who is responsible for quality assurance. Also, as a part of this process, all cannabis must now be transported via licensed transporters and tracked from “seed to sale.” This new tracking system is not unique to California. All four of the recreational cannabis states—Colorado, Washington, Alaska and Oregon—have already implemented “seed to sale” tracking systems as part of their state regulations. What is unique to

California is the creation of the mandatory third-party distributor/ transporter. With the exception of Oregon, only three types of state licenses are provided for in the recreational cannabis states: cultivators, manufacturers/processors and retailers. Though Oregon provides for a fourth type of “wholesaler” license— allowing licensees to buy, sell and transport cannabis between cultivators, manufacturers and dispensaries—it is not mandatory for Oregon growers to have to go through a wholesaler to sell their products.

“California’s MMRSA, on the other hand, creates a new ‘bottle-neck’ in the cannabis supply chain, mandating that all cannabis and cannabis products go through a licensed distributor.” California’s MMRSA, on the other hand, creates a new “bottleneck” in the cannabis supply chain, mandating that all cannabis and cannabis products go through a licensed distributor. While mandatory distribution is not a new concept - e.g., in the alcohol industry, producers can only sell their products to wholesale distributors who then sell to retailers—it is certainly a novel concept in the cannabis industry. Because California has always been a cultural trend-setter when it comes to cannabis, it will be interesting to see if other states follow suit.

cont. on page 34 32

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p h o t o s b y Da n Ho l m

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B2B

LEGAL

Distributors vs. Transporters—What is the Difference? cont. from page 32

The MMRSA lays out the roles of distributors and transporters as follows: Distributors (a Type 11 license) are licensed “to engage in the business of purchasing medical cannabis from a licensed cultivator, or medical cannabis products from a licensed manufacturer, for sale to a licensed dispensary.” In essence—distributors are third party vendors buying product from licensed cultivators and selling to licensed dispensaries. The MMRSA requires that all cultivators and manufacturers send their products to third-party distributors prior to distribution to a dispensary. Distributors are the mandatory “middle-men” for all medical cannabis in California. Distributors are also tasked with coordinating quality assurance by ensuring that cannabis products are batch-tested and verified as safe (by Type 8 Testers) before entering the retail market.

Transporters (a Type 12 license), on the other hand, are responsible for the actual physical transportation of cannabis between licensed cultivators, manufacturers, distributors and/or dispensaries. (AB 266, 19334(a)(3).) Unlike distribution, where the end receiver of cannabis is a licensed dispensary, transport can involve the movement of cannabis from cultivators to distributors, or from distributors to manufacturers, or from distributors to testers, etc., and vice versa. The role of the transporter is to submit electronic shipping manifests prior to all transport activity (think FedEx tracking info!) and to update the tracing system at each point (from seed-to-sale) for supply chain integrity. (SB 643, 19337.)

Testing (Type 8) ) 12 sporter n pe y tra (T

cultivator (Type 1-3)

distributor (Type 11) transporter (Type 12)

manufacturer (Type 6-7)

Cannabis Following the Alcohol Model Consistent with how most states regulate alcohol, the MMRSA largely prohibits vertical integration—e.g., it prevents cultivators, manufacturers, distributors and retailers from being “tied” to one another. As opposed to the existing closedloop, vertical integration model in which collectives cultivate their own crop for distribution to its members, the MMRSA implements a

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Dispensary (Type 10/10A)

patients

transporter (Type 12)

three-tiered structure of producers, distributors, and retailers—noticeably similar to California’s alcohol regulations. Subject to only a few exceptions, the MMRSA keeps production (cultivation and manufacturing) separate from retail (dispensaries) by adding the third-party distributor. Combining Different License Types - Licensing Restrictions: To further this end of quality assurance, the MMRSA

places restrictions on cross licensing for distributors and transporters. Aside from a distributor license, transporters are prohibited from having any other state license. Once a transporter, only a transporter! Distributors are also prohibited from having any other type of license. But, as a distributor, the MMRSA requires that you also have a transporter license. Have we thoroughly confused you yet?! To put in simpler terms, Type 12 Transporters may

have Type 11 Distributor licenses, but Type 11 Distributors must have Type 12 Transporter licenses. Its like standardized testing all over again. To prevent conflicts of interest, distributors-transporters are also prohibited from having an ownership interest in any cultivation, manufacturing, testing or dispensary licensee. Middlemen Increasing the Costs of Business? This new “checks and balances system” is

undoubtedly great for consumer safety and eliminating the black market—revealing exactly where your cannabis came from and abuses that occurred during the process. Does this mean doing business just became that much more expensive?! Usually, cultivators and manufacturers sell directly to dispensaries and distribute their own goods. Some think that the MMRSA’s definition of “distributor” sounds like only distributors will be allowed to buy from cultivators/manufacturers to then sell to dispensaries. False. The MMRSA “does not limit the ability of licensed cultivators, manufacturers, and dispensaries to directly enter into contracts with one another indicating the price and quantity of medical cannabis or medical cannabis products to be distributed.” This means that cultivators/ manufacturers can continue to set their own prices and deal directly with dispensaries. Indeed, the distributor’s function is simple—to transport, send to testing, and to inspect— all products before they hit the retail market. After testing and final inspection is complete, the distributor can then transport the cannabis between the cultivators, manufacturers and/or dispensaries pursuant to their respective contracts. Distributors can collect a fee for their services.

MMRSA Overkill? AUMA to the Rescue! A new recreational cannabis initiative— called “The Adult Use of Marijuana Act” (or

AUMA)—is gaining tons of traction towards California’s November ballot. Like the legalization measures approved by voters in Colorado, Washington, Alaska and Oregon, the AUMA (if passed) would permit adults 21+ to legally possess, use and grow recreational cannabis, with certain limits. So what exactly does this mean for California’s MMRSA supply chain? Well, the AUMA’s licensing scheme largely mirrors the MMRSA, but with certain key differences. Unlike MMRSA, AUMA allows but does not require that cultivators send their product to independent “distributors” (Type 11 licensees). This mandatory requirement, modeled on the alcohol industry, is one of the most controversial features of MMRSA, as it interjects a whole, new, costly distribution layer between the grower and distributor. Under AUMA, the only licensees not eligible to distribute for themselves are the new, Type 5 large-scale cultivators. With recent polls showing that up to 60 percent of California voters are ready to legalize adult use cannabis this November, the passage of the AUMA seems likely. This means that going through a third-party distributor will only be mandatory for large-scale cultivators. If history is any indicator, then it won’t be surprising to see other states modeling their cannabis regulations after California’s AUMA, if passed. d

Investment by ArcView investor members 2013-2015 annual investment ($ millions) $50

$45 MILLION into 66 companies

$45 $40 $35 $30 $25 $20 $15

$4 MILLION into 8 companies

$14 MILLION into 27 companies

$10 $5 $0

2013

2014

2015 Source: ArcView Investor Network

CULTUREB2B.com

CANNABITS B2B

LINER NOTES

by Natasha Guimond

You’ve heard of Larry Flynt, right? He’s that famed pornographer and Hustler publisher that invested $100,000 in the publicly traded cannabis company that’s based in L.A., Pineapple Express, Inc. It’s not just a movie. According to their website, it’s a provider of consulting, investing in, expanding and/ or rebranding existing and newly established businesses in the cannabis industry. If that sounds broad, it’s because it is. And get this— Larry’s daughter, Theresa? She’s the VP of Business Development. It probably wouldn’t be fair to say, “Hook, Line and Sinker,” but you know that’s a big part of why this relationship exists. Three cheers for nepotism! Seriously though, Larry Flynt’s done so much for the cannabis community, it’s no wonder his daughter ended up getting involved. Make sure you buy stock before they open up the first nationally-branded chain of cannabis retail stores. It’s PNPL on the OTC Pink exchange. Now, have you heard of Panaxia? They’re an Israeli medical cannabis company that’s building a new plant in New Mexico. Why is this a big deal? Because around the end of May, they signed an agreement with Ultra Health, which is the leading medical cannabis distribution company in New Mexico. They’re going to build a cannabis processing plant together. That’s a pretty tall order, but they’re committing fully. Apparently, Panaxia has a way to know and

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extract exact doses of what patients need from medical cannabis, mainly highlighting THC and CBD. Even though some patients appreciate the routine and ritual that comes with smoking flower, many patients will be happy to know there’s a precise method of taking their medicine. This is especially good for the ones who are concerned with what smoking does to their health. Sounds like a match made in hash heaven. The plant should be built by the next B2B issue. Moving into June, we’ve got several hot topics, starting with Oregon. Since legalizing recreational cannnabis, one of the requirements of the state is that all retailers keep track of their sales. Well, if that’s not called a no-brainer, what is? However, what’s great about this is that it makes room for more businesses to come in. Specifically, those in the software industry. For example, companies that have developed software that tracks sales, packages, transfers, plants and harvests, among other functions. Right now there are four software companies that have been approved to just that for every single retailer in Oregon. Those companies are OMMPOS from Astoria; Flowhub from Denver; Greenbits from Portland; and Portland-based Odava. One of the biggest things to happen in June, however is this business with MedMen. No, that’s not a typo. No one’s talking about retro-advertising. But what should be on your mind is the $100 Million investment fund that L.A. cannabis consultancy firm, MedMen launched. The big deal here? It’s the first private equity vehicle of its kind. They’ve already helped 100+ businesses in the past seven years

and with that type of investment, are ready to dominate the cannabis industry with major expertise. Whether companies want to focus on cultivation, extraction, production, retail operations or a mixture of the above, MedMen and its fund is ready to take them on and succeed. Another big deal that happened towards the end of June is one that is sure to please a lot of people. Ever wanted to go to Jamaica? Well, now you really have a reason. What’s that? Oh, you know, just your average fly-to-Jamaica-and-getyou-medical-card-before-you-ever-leavethe-airport type deal. Yes, that’s right. As soon as you land, you can get certified. Better yet, that card allows you to carry up to two ounces of cannabis, which can be purchased easily at one of the many licensed retail centers. Sounds like a cannabis-couple’s dream honeymoon. Actually, you should probably just have the whole wedding there. If everyone’s medicated, there’s no drama, right? And because we all knew it was going to happen sooner or later, in July it was confirmed that wholesale recreational cannabis prices tumbled to a new low in Colorado. Many people got into it for

the money, but now things are evening out. There’s still a lot of demand, but there’s also a lot of supply. Business 101 teaches us about supply and demand. If you’re wondering if they’ll eventually have bargain bins for cannabis, you’re not the only one. If you want to be on top, you’ve got to make enough product to stay on top. However, there are a lot of cannabiskingpin-wannabes in the Colorado game, but not enough consumers to where one edges out above the rest. Now they’re all swimming in a sea of green, and it’s not money. It’s cannabis. Who ever thought too much cannabis would ever be a problem? Welcome to the future. It’s looking very bright. d

Third Annual Cannabis World Congress & Business Exposition

WHAT: Cannabis World Congress & Business Exposition. WHEN/WHERE: Wed, Sept. 7-Fri, Sept. 9. Los Angeles Convention Center, 1201 S. Figueroa St., West Hall B, Los Angeles, California. INFO: Visit www.cwcbwxpo.com for details.

Mark your calendars for the Third Annual Cannabis World Congress & Business Exposition (CWCBExpo). This cannabis business event will have important resources for current and potential cannabis business owners and managers. There will be various exhibitions, products and services available for attendees by participating business like Clover Leaf University, Cannabis Career Institute and Women Grow. For those looking to expand their business expertise, there will also be plenty of seminars on all types of

subjects, all to help guide you into this rapidly growing industry. Examples of some available seminars are “Tips and Tricks to Running a Successful Dispensary” and “A Legal Primer for Entrepreneurs and Investors in the Cannabis Industry.” The event will also feature knowledgeable speakers from many aspects of the cannabis industry, such as business owners, CEOs and reputable attorneys. Overall, this event will be valuable to anyone who is already involved in cannabis industry, as well as those still looking to get their feet wet.

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B2B

TRENDS

By Leaps And Bounds Cannabis dispensaries make more money per square-foot than Whole Foods

by Nicole Potter

The cannabis industry has increased its sales rapidly over the past few years, and it’s showing no signs of slowing down. It’s becoming a staple of life for so many users, and with every step towards nationwide or worldwide legalization, the industry becomes stronger. Earlier this year, Washington State reported that cannabis was outselling household necessities such as wine, milk and bread in sales by a wide margin—and new numbers are reflecting that cannabis is selling more product per square foot than Whole Foods grocery store. Although the differences between a cannabis dispensary and a grocery store are drastically different, the sudden rise of cannabis proves that it’s only a matter of time before it overcomes even more successful businesses. According to the Marijuana Business Factbook 2016, the combined average annual revenue per square foot of medical and recreational cannabis dispensaries is $974. Whole Foods on the other hand, has reported yearly revenue of $930 per square foot, according to TIME. This is likely because cannabis

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products are smaller in size, allowing more products to be stored in a single space, whereas Whole Foods product packaging or the natural size of produce can take up more space on shelves. According to Quartz, the only three businesses that rank higher in average annual revenue per square foot is Costco at $1,302, luxury jewelry stores at $3,132 and Apple stores at a whopping $4,799. Businesses that are ranked lower than Whole Foods include specialty tea stores, pharmacies/drug stores and department stores. While facts dictate that cannabis is “beating” Whole Foods in numbers regarding sales per square foot, the cannabis industry is still facing many issues that will ultimately hold it back. In order to operate according to the many city and/or state regulations, cannabis dispensaries are required to pay much more in place of licensing fees, aside from normal business transactions. The ever-present hazard of police raids (regardless if the business is located in a state that has legalized recreational cannabis, due to the looming illegality of cannabis on a federal level) is an

issue too. Banking is also a much cited source of stress and frustration for dispensaries, as there is no legal option for these businesses to safely store their earnings. These are just a few of many dilemmas that cannabis businesses must face, compared to the safer and completely legal operation of other businesses and industries. One of the most influential hurdles for cannabis could come from its continued success. According to Leafly, cannabis as a maturing market should expect potential property to be used for dispensaries to become scarce. Leafly also notes that dispensaries have taken up residence anywhere that it is legal to do so, and as a result are often occupying buildings that are “too big to merchandise correctly or too small to maximize revenue,” which could affect the revenue per square foot numbers in the future. Not to mention that as cannabis becomes increasingly more mainstream, property owners whose buildings are available for leasing will eventually realize that their real

“. . . the combined average annual revenue per square foot of medical and recreational cannabis dispensaries is $974. Whole Foods on the other hand, has reported yearly revenue of $930 per square foot . . .”

Average Monthly Retail Recreational Sales by State in 2016 Average monthly Sales $124,000,000 $120M

$100M

$80M

$62,000,000 $60M

$46,000,000

estate is ideal for competing cannabis businesses, and may raise their rent to compensate for the expected income. However, even in the face of extra fees that many other businesses like Whole Foods don’t have to worry about, cannabis is expected to continue to grow rapidly. Cannabis sales from medical and recreational dispensaries are estimated to reach 11 billion annually by 2020, but even now, cannabis has surpassed other markets, such as e-cigarettes, which have been reported at making $1.5 billion and Girl Scout Cookies at $776 million. With the assumption of steady incline, cannabis could eventually outdo the beer industry, which makes $101.5 billion annually or wine at $37.6 billion. Despite the high amount of money that the cannabis industry has managed to accumulate over the past few years, it’s still currently smaller than Whole Foods as a whole. The cannabis industry made between $3 billion and $4 billion in annual sales last year, but Whole Foods has reported annual sales numbers at $15.4 billion in fiscal year 2015. Given time, the cannabis industry is bound to catch up. d

$40M

$20M

$12,000,000

$0M

Total

Source: The Cannabist, Washington State Liquor and Cannabis Board (WSLCB), The Register-Guard Washington & Oregon data taken from January 2016 through May 2016, Colorado data taken from January 2016 through April 2016. Numbers rounded to nearest million.

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B2B

TECH

Disruption at the Highest Levels KIND Financial

Tech Companies are Transforming the Cannabis Industry by Benjamin M. Adams

It is perhaps the most exciting times for cannabis tech companies in Silicon Valley. Both Google and Microsoft have hinted about their intentions of investing in digital platforms that will be used in the cannabis retail market. Just weeks after Microsoft announced its plan to invest in cannabis-related software, Microsoft’s rival Google, seeing the opportunity, contacted Colorado’s LivWell with questions about the cannabis industry. Several ex-Google employees have already joined the cannabis market. The tech industry has been the most willing to take the plunge and warm up to the risky cannabis sector. You can’t help but ask yourself if so-called cannaphobia is coming to an end. Colorado-based Arrow Electronics, a Fortune 150 company, recently announced their partnership with San

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Diego-based MyDx to develop handheld chemical analyzers which can be used to detect the potency of cannabis strains. Arrow is just the latest major tech company to show serious interest in the cannabis industry. The cash-only status of the cannabis industry has opened a void for techoriented online platforms. Beyond cultivation, tech companies are multiplying exponentially. Regulatory compliance is only going to continue to expand. The fastest-growing ancillary cannabis companies are looking at laboratory testing, compliance and web presence. A digital strategy involving sustainable visibility on social media is crucial for any business in the cannabis sector that wishes to survive the long run. These cannabis tech companies could expand to become the industry standard of the cannabis market tomorrow.

Microsoft’s announced partnership with cannabis seed-to-sale tracking system KIND Financial removed any remaining doubts of where the cannabis industry is headed. The willingness of Bill Gates, arguably the richest man on the globe, to invest in anything cannabis-related is a breath of fresh air. Microsoft’s own team will assist state and local governments with tracking cannabis and effectively deflecting it from reaching the black market. The Microsoft Health and Human Services Pod will connect and track managed service providers. KIND believes that Microsoft’s Azure Government cloud is the only cloud platform capable of successfully complying with strict government standards. Will KIND Financial finally close the gap between cannabis businesses and regulatory government bodies?

GreenRush San Francisco-based GreenRush is a patient-focused delivery platform—think GrubHub. GreenRush currently has more collective and product options than any other delivery platform in the state of California. Like other delivery platforms, verified patients can order cannabis for delivery from home using their mobile app. GreenRush has a strategic partnership with Ecann for financial leverage. GreenRush has linked up with over 200 collectives in the state of California. Consumers, they say, can have cannabis delivered at their doorstep within 60 minutes. >>

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B2B

TECH

Weed Finder 20,000 cannabis business listings makes Weed Finder a game-changer. Directory listings are one way to reach out to network and attract new customers. Weed Finder is available for $1.99 as an app in the iTunes store and as an Android app at Google Play. Weed Finder gives businesses a way to connect with real-time potential customers. An interactive map helps consumers locate the closest cannabis collectives and place their order. Weed Finder’s blog, Weed Reader, updates its customer base with content surrounding the cannabis and tech landscape.

Jane Denver-based Jane hopes to disrupt the seed-to-sale tracking industry with a kiosk that accepts cash. The Jane kiosk works like an ATM in reverse. Kiosks are replacing human beings in the retail industry, and the cannabis industry is no different. Jane offers a way for

cannabis collectives to reconcile cash with the IRS. A Jane kiosk can be rented by collectives for a mere $2,495 and $3,495 a month. A Jane kiosk can be purchased for approximately $15,000. The money spent on the kiosk is a small price to pay rather than accounting for losses coming from employee theft and inventory discrepancies. By providing a transparent mechanism for the IRS to audit cannabis businesses, Jane hopes to make compliance with a complex regulatory environment a reality.

“The cash-only status of the cannabis industry has opened a void for techoriented online platforms.”

Flowhub Flowhub’s top-of-the-line POS system creates mobile scanning, asset management and a software platform that can be accessed remotely. In Colorado, for instance, Flowhub works in conjunction with the state’s METRC (Marijuana Enforcement Tracking Reporting Alliance) program. Flowhub also works with Colorado’s application programming interface (API). Oregon and Alaska also opted to adopt the METRC system. It offers a radio

frequency (RFID) tracking system to track product from seed to sale. In Washington, companies are siding with BioTrackTHC, which is contracted by the state, instead of the METRC system. Flowhub’s CEO Kyle Sherman hopes to make compliance a piece of cake—and compliance isn’t something cannabis businesses are used to at this point. d

units

Washington cannabis concentrate & infused product sales 100,000 80,000 60,000 40,000 20,000

Solid edible

extract for inhalation

topicals

Jun 2015

May 2015

Apr 2015

Mar 2015

Feb 2015

Jan 2015

Dec 2014

Nov 2014

Oct 2014

Sep 2014

Aug 2014

Jul 2014

Liquid Edibles

Source: Washington State Liquor & Cannabis Board

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PRODUCT HIGHLIGHTS

CBD Naturals Nano CBD Water

Water is one of the most important substances on the planet—no life form can live without it. Luckily, there’s a new water product on the market that both hydrates users with essential vitamins and antioxidants, but also contains ample amounts of CBD. CBD Naturals’ Nano CBD Water mixes crisp and clean, purified water with a dose of CBD, which we all know is non-psychoactive and comes from the hemp plant. It also contains d-Ribose (a carbohydrate that gives energy to hearts and muscles) Methylcobalamin (the active form of Vitamin B12 which boosts metabolism) and Coenzyme Q10 (which acts as an antioxidant and helps both metabolism and energy creation). Nano CBD Water is unlike any other water out there, and it’s the perfect way to hydrate and get ready for your daily summer activities! PRICE: $3.99-$5.99 MORE INFORMATION: cbdnaturals.com

KandyPens Gravity Vaporizer It’s concentrate season, so it’s important to make sure you’re equipped with the best tool to take advantage of your high quality waxes. The KandyPens Gravity Vaporizer sticks out in the sea of run-of-the-mill vape pens, offering a unique coilless ceramic atomizer technology and quartz crystal atomizer that allows for some of the cleanest and purest wax experiences imaginable. Its temperature controlled battery has a leg up against competitors too with four preset temperature settings available at 300°, 350°, 309° and 430°. Although the specs are always important, the look and feel of a pen can also be a factor, and this particular style of sandblasted black finish on such a small pen results in a product that’s both sleek and discreet. Best of all, there’s a lifetime warranty on the battery to ensure that users can get the most out of their pens. PRICE: $129.95 MORE INFORMATION: www.vapornation.com

CannaRegs One of the most important aspects of being a successful business owner in the cannabis industry, regardless of what kind of product or service you sell, is being able to operate according to exact regulations in your city and state. Fortunately, services such as CannaRegs make it easy to keep track of your local and state regulations. It’s a web-based service that offers the best, most up to date access to cannabis rules and regulations. The website is highly organized to represent popular topics such as taxation, zoning and licensing, and also sorts those into license types for cultivation, dispensary and testing in order to cover as much ground as possible. It also offers a database of documents, forms, requirements and checklists, as well as documentation of others’ violations that can help business owners identify issues with how they operate in their area before problems arise. Alongside a team of well-informed regulatory attorneys and IT experts, CannaRegs is the perfect source for valid and authorized information about your local cannabis industry. MORE INFORMATION: cannaregs.com

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