Marijuana Industry News November 2016

NOVEMBER 2016

MJINEWS.COM

Pharma’s

European

Future

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leads in tech

Kyle Kushman

Cultivates

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Naturally

What’s ‘legal’ and where?

WORLD OF CANNABIS Produced by MJIC Media and Sponsored by Marijuana Investor Summit

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LAS VEGAS

2016

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CONTENTS NOVEMBER

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20 1 6

30 14

IN THIS ISSUE

S P EC I A L F E AT U R E S

04 From the Editor’s Desk

10 International Cannabis Law: An Overview & Spotlight on Uruguay

06 Kyle Kushman on Veganic Healing, Community and Connection

14 It’s Bob Marley’s Cannabis Brand, Naturally

18 Kush Bottles Packaging Steady Profits

26 Navigating California

Cannabis Legislation—the Map to the Green Rush

22 The Future of Pharmaceutical Cannabis in Europe

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28 Setting the Stage: Marijuana

Investing in the United States

30 Marijuana Market Hype in Canada

34 Israel at the Helm: Medical Cannabis Research Spurs Technology Innovation

FROM THE EDITOR'S DESK

Does the marijuana world need another magazine?

T

he short answer to the headline question is yes, the marijuana world does need another magazine and it needs this one.

Although I’m not paid by the word, the inaugural issue of Marijuana Industry News magazine deserves better than a one-word defense, so here it is.

NOVEMBER 2016 PUBLISHER

The global legal marijuana industry is probably one of the most complex frontier markets in existence. When, where and under what circumstances is it legal are loaded questions and the answers can’t be taken for granted. Today’s answer may not be the same tomorrow.

Randy Shipley & Kristin Fox EDITOR IN CHIEF

Kristin Fox MANAGING EDITOR

Caroline Cahill CONTRIBUTING EDITORS

Legalization isn’t just marching across the United States — it’s marching around the globe. There is much to learn from the collective experience, and there is much that nascent and developed markets can gain from one another.

At Marijuana Industry News, our mission is to present global thinking that empowers our readers to act locally. Our regional market focus is Southern California, currently a highly progressive medical marijuana market, set to become something much bigger should adult-use be legalized in 2016.

Our global focus in this issue concentrates on compliance, international law, cultivation, medicine, investing and technology. Future issues will include product reviews, post-election analysis and insight into the science of cannabis.

Building a global legal marijuana community requires many voices and we invite our readers to contribute ideas, photos and letters to the editor.

Welcome to the world of legal marijuana!

Kristin Fox Editor-In-Chief Co-Publisher

Cultivation - Josh Browning Legal – CannaRegs/Amanda Ostrowitz Regional - Jon Slotnick Medical and Extracts - Anne Wallace Investing - Christopher Faille Technology - Jen Knox DIGITAL EDITORS

William Sumner Colin Burch Amanda Taylor (Intern) DESIGN AND PRODUCTION

Picante Creative SALES

Robb Erwin Michelle Salser Jim Saunders GENERAL INQUIRIES, SUBSCRIPTIONS & ADVERTISING INFORMATION

Randy Shipley, President MJIC Media randy@mjic.com https://www.linkedin.com/in/shipleyrandy Marijuana Industry News, Vol. 1, Issue 1 14 Orchard Suite 200, Lake Forest, CA 92630 Marijuana Industry News is published by MJIC Media, a division of MJIC Inc. All materials in this publication are for educational and information purposes only and intended exclusively for states with legal cannabis markets. Marijuana Industry News assumes no responsibility for any claims or representations within the magazine’s content or its advertisements.

Marijuana Industry News does not promote or condone the illegal use of any of the products within the publication. MJIC Inc. may hold positions in some of the companies covered and will disclose as appropriate.

Copyright 2016 by Marijuana Industry News.

Reproduction of this content, in whole or in part, without written permission from the publisher, is explicitly forbidden.

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Kyle Kush on Veganic Healing, Community and Connection

BY J O S H B R O W N I N G

P H O T O S BY K Y L E K U S H M A N

king of cultivating cannabis, Kyle Kushman has been involved in the industry for nearly 30 years. Along the way, he has experienced every high and low imaginable — from arrests for growing illegally and having to restart his seed collection from scratch to national success as a university instructor, staff writer for High Times, winner of 13 Medical Cannabis Cup Awards and lauded industry innovator. What is clear from talking to Kushman is that he isn’t simply a successful grower; he is an ambassador for the industry and is incredibly grateful for the opportunities he has been given.

Kushman’s success was clearly not bred by blind ambition; it was bred by a simple love of cannabis. To him, cannabis isn’t just a plant that offers a high, but is a crop that can offer healing, community and connection. To hear Kushman tell his story, his accomplishments have been the result of a series of fortunate events that he did his best to take advantage of.

“It started out very innocent, sometimes I kind of refer to myself as a glorified high school pot dealer who just kind of walked into the right head shop one day and ended up at High Times,” Kushman said, laughing. “My life has not been a planned event.

I didn’t plan to be a journalist, I didn’t plan to own a nutrient company, I certainly didn’t plan to be a weed-lebrity, I didn’t plan any of this … . Am I grateful for it? Every day … my goal is basically

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shman to continue the normalization and socialization of cannabis use.”

Who is Kyle Kushman?

Formerly Adam Orenstein, Kushman took up his new name when he went to work for High Times magazine. It was here that he gained the nickname the Kush Man, eventually evolving into Kyle Kushman. This job opened many doors to him and ultimately inspired his move to California during a trip to talk to Eddy Lepp — a cultivator given a 10-year mandatory minimum sentence in 2009 for having a medical marijuana garden with more than 1,000 plants.

“It wasn’t a business decision. It was a life decision,” Kushman said. “I had gotten my fill of being an illegal guerilla grower in the mountains of New York and New Jersey for almost 10 years … I didn’t really feel like doing that again so I started preaching compliance.”

Soon after relocating, he began speaking about cannabis cultivation at Oaksterdam University and Peace in Medicine in Sebastopol, California.

These weren’t things Kushman did for money; he did them because of how he sees cannabis — an important part of life that needs to be shared.

Even in his early days, Kushman

didn’t see cannabis the same way that many of his contemporaries did. While they were guarding their growing techniques, Kushman saw cannabis as something to be shared so that everyone could learn from each other.

“I’ve been very grateful ever since the beginning … and since then I’ve wanted to be very free and open with everything I’ve learned,” Kushman said. “The most important thing is to keep on teaching the knowledge of hemp, food for food, fuel, fiber and medicine.”

Kushman himself was never shy about taking suggestions or advice, and this openness led to what would eventually become the Vegamatrix nutrient line. While he was always an organic farmer, Kushman had not experimented with veganic gardening until a friend asked him about it.

“Veganics kind of fell into my lap, I didn’t invent it any more than I invented organics.”

Not a vegan himself, he wasn’t initially excited about veganic growing but followed up with it anyway.

“I’m always making my own stuff, I was just using lots of companies and augmenting. During my time at High Times, I basically became a products guy, I started the S.T.A.S.H. Awards.”

Manufacturers would send him prod-

ucts, which he would then send to peers for testing. This gave him the research to develop his own nutrients, a process he had been toying with as early as 1987.

The Origins of Vegamatrix “If it wasn’t for the fact that I had to so heavily augment the products that I was using, I never would have decided to make Vegamatrix.” The Vegamatrix plant nutrient line now consists of seven specific variants to aid the growth of plants, and the year it was introduced it actually won the 2014 High Times S.T.A.S.H. Award for Best Nutrient on the Market.

After more than three years of research and development, Vegamatrix was finished.

“It’s 100% veganic, meaning that it’s organic but it’s also vegan, so there’s no animal byproducts whatsoever,” Kushman said.

“As the earth gets dirtier, so does the stuff coming out of the back ends of animals. The shit’s not as clean as it used to be. It’s filled with antibiotics, hormones and pesticides.”

After experimenting with the veganic method, Kushman noticed that he produced better tasting flowers than in his previous years. Every person that tasted his product agreed, saying it was the cleanest, smoothest and most potent medicinal cannabis they had ever smoked.

“Organic nutrition depends on decomposition and enzymes. All kinds of November 2016 |

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Getting Down and Dirty True to his word, Kushman does not keep his preferred cultivation system secret. At his core he is a gardener and doesn’t feel like it has been a day of gardening unless he comes back with soil under his fingernails. He prefers hand-watered soil as a medium and uses a professional horticultural mix because soil is too dense and can have sand, rocks or fungus in it.

He encourages anyone to grow their own medicinal cannabis if their state allows it, and urges people to strictly follow the respective rules. “I don’t want anyone to do anything illegal … but I fully encourage anyone who lives in a state that has provisions for you to cultivate your own medicine,” Kushman said. “We’re almost to the end of the war … don’t get taken down by one of the last bullets.”

This sentiment informs his Top 5 Tips for personally growing medical marijuana.

•

“Give something back.” Even if you live in a state where cultivation is not legal, Kushman encourages people to join an organization like the local NORML chapter and to attend rallies that promote legalization.

•

“Start from seeds if you can … you deserve to know the whole cycle.” There are many places you can go, with festivals, events and dispensaries often having seeds that you can purchase.

•

“Don’t go big the first time.” With personal gardening, Kushman suggests keeping systems down to at least 4,000-watt high intensity discharge lights to get comfortable with the process. With more lamps there is more heat, and more heat requires more appliances. “You want to be able to focus on the plants, not the appliances.”

•

“You can’t rush a plant.” Learn the language of the plant through lots of observation. “You don’t want to be one of those people that buys the hydro setup and checks on it every 3 to 4 days because you simply aren’t going to learn anything.”

•

“Do not chop early.” After putting so much time and effort into growing this wonderful herb for yourself, be sure it is harvest time. He suggests that growers “mic the trichs,” putting a microscope over trichomes and when they start to turn amber, you will know it is time to harvest.

Kushman suggests that an easy way to lower entry costs is to avoid a massive, high-tech grow room with climate control and 4,000-watt lights.

You can learn to cultivate high-quality medicine at a relatively low cost by simply starting with two 600-watt lamps and a standalone air conditioner in a tent, thereby avoiding the construction of a massive infrastructure. The most common pitfall is simply going too big and learning about the system as opposed to learning about the plant.

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things need to happen before it actually becomes available to the plant. The plant’s mycelia on the roots have to work to get inside that molecule, and then beneficial bacteria, which are present, break down that molecule. With veganics, it’s like a wheatgrass smoothie. It is just instantly bioavailable.”

Vegamatrix is nearly 100% bioavailable, and according to Kushman, it feeds plants more quickly and easily, giving them more energy to produce cannabinoids, terpenes and volatile oils. It can be used with any growth medium or method of cultivation, be it rock wall, soilless or any combination of the two. It can be aeroponic or hydroponic, can be hand-watered, works well through emitters and can be used in auto-watering systems.

In fact, Vegamatrix only has one restriction — it must not be recirculated. This is a process called drain-to-waste, meaning there is no reservoir filled with nutrients.

Nutrients have to be mixed within 24 hours of applying them. “[Waste] is actually a bad word, but the truth is that this method leads to much less water wasted.

You actually only use as much water as the plants need … with a hydroponic garden, every time you fill that reservoir you’re throwing away half the water when you’re done and all those heavy metals and nasty salts are then going down the drain.”

Vegamatrix is also 100% nontoxic, safe for all living things and is safe to pour down the drain.

Kushman is especially proud to point out that it produces the lowest numbers of heavy metals he has ever seen.

According to Kushman, other nutrients often have average readings of 1 to 3 parts per million of heavy metals. After sending his cannabis to be tested, the machines actually had to be recalibrated because readings initially came back as zeros.

“We came up between 20 and 60 parts per billion of heavy metals,”

Kushman said. “That is truly, truly amazing and important when it comes to true medical marijuana … . I’ve had mothers and children tell me that for the first time they don’t have pain.”

“One out of so many times, [medical marijuana] actually causes pain. It will give them migraines or bronchial distress or some kind of thing because of the impurities, and it doesn’t just have to be pesticides.”

These reactions can actually be caused by heavy metal residue that is left over from nutrients that were never meant to be combusted or smoked — they were meant to be used on produce to be consumed.

Kushman’s philosophy is simple, “If you’re going to call it medicine, you better make sure it’s actually good for you.”

Keep Up With Kushman In the future, Kushman is looking forward to breeding and genetics, the current rebuilding of kylekushman.com, attending the State of Marijuana address on the Queen Mary and his recent repartnering with Oaksterdam University to develop a series of filmed online courses.

Kushman also hosts “The Grow Show,” a podcast on cannabisradio.com.

Doing the show for more than a year now, Kushman has about 50 episodes available and each week he interviews a cannabis dignitary or famous figure. In all, Kushman continues to do his best spreading the positive word on cannabis.

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LEGAL

International Cannabis Law

An Overview & Spotlight on

Uruguay

BY W i l l i a m G u n n i s o n A N D G r e g o ry H u f fa k e r I I I , Can naRegs

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hree United Nations treaties establish the current framework for international drug control policy: the 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic Substances and the 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. Under these treaties, nations must prohibit all use of cannabis except for scientific and limited medical purposes authorized by governments. The International Narcotics Control Board, the Commission on Narcotic Drugs and the World Health Organization are the international bodies responsible for implementing and enforcing these treaties.

The 1961 Single Convention on Narcotic Drugs established four lists containing more than 100 substances and classified these substances according to how strictly they should be controlled. The substances range from most dangerous to least dangerous, in this order: Schedule IV, Schedule I, Schedule II and Schedule III.

Substances in Schedule IV are considered to have particularly dangerous properties compared to other drugs and are to be subjected to the most rigorous controls. The Single Convention placed cannabis in Schedule IV and established a goal of eliminating the traditional use of cannabis within 25 years.

The 1971 Convention on Psychotropic Substances was negotiated to establish controls over new psychoactive substances such as LSD and MDMA. This treaty established four schedules, with Schedule I being the most restrictive and Schedule IV the least restrictive. Delta-9-THC, the primary psychoactive component of cannabis, was initially placed in Schedule I, the schedule for substances that pose a serious risk to public health and have no acknowledged medicinal purpose; however, in 1991, THC was moved to Schedule II, the schedule for substances with an acknowledged medicinal purpose.

In 1988, in an effort to stem the

growing threat from organized crime and drug cartels around the world, nations agreed to the 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. The 1988 Convention took a more hard-line approach against drug trafficking and required nations to impose criminal sanctions for illicit production of Schedule I substances.

Taken together, nations have agreed under the three drug control treaties to prohibit the use of cannabis except for scientific and medical purposes authorized by governments, to eradicate the plant where it grows and to impose criminal sanctions for illicit cultivation, with the International Narcotics Control Board, the Commission on Narcotic Drugs and the World Health Organization in charge of implementation and enforcement.

The International Narcotics Control Board is a quasi-judicial body that works closely with governments to help them secure the narcotic drugs they need for scientific and medical purposes and is also responsible for ensuring these governments comply with treaty obligations.

The Commission on Narcotic Drugs is the legislative and policymaking body. It decides which substances belong in which schedule.

The World Health Organization is responsible for assessing the medicinal properties of a substance and making recommendations to the Commission on Narcotic Drugs regarding scheduling.

In recent years, the international drug control treaties have been under pressure from nations that have enacted cannabis reform inconsistent with treaty obligations.

In the United States, several states — Washington, Oregon, Colorado and Alaska — have passed recreational marijuana laws. Recreational marijuana initiatives are on the ballot in California, Nevada, Maine and Massachusetts. The Canadian government has promised that, in order to keep marijuana profits out of the hands of criminals, it will introduce recreational marijuana laws in the spring of 2017.

Uruguay made headlines in 2013 when it became the first country to pass recreational marijuana laws. Mexico, Colombia and Guatemala have called for analyzing regulatory or market measures for cannabis in order to impede the flow of resources to organized crime groups.

In 2012, the presidents of Mexico, Colombia and Guatemala called for a United Nations General Assembly Special Session to discuss international drug policy reform. The meeting was eventually held in New York City in April 2016 and was the first time since 1998 that nations convened to discuss international drug policy. The countries seeking cannabis reform were optimistic about a potential

shift in policy away from prohibition. The reformers, however, were largely disappointed because the outcome of the meeting did not signal progress for international drug policy. The Outcome Document, which describes the agreed-upon policies, reinforces that the three drug conventions are the cornerstone of the international drug control system and that new and evolving challenges should be addressed accordingly. Status quo prevailed.

The United Nations will meet again to review international drug policy in 2019.

Uruguay Uruguay made international headlines in 2013 when it became the first country to legalize recreational cannabis, doing so via a legislative bill signed by the president, after the required two-chamber passage.

The implementation, however, has been rocky, which is an unfortunately common theme in South American politics; one need look no further than

The Uruguayan law allows for three different methods to legally obtain cannabis: buying from a pharmacy, joining a growing club or growing it oneself. the attempts to eradicate cocaine production in the region for another such example. The country also has a medical cannabis program, while hemp is handled separately as an agricultural crop.

The Uruguayan law allows for three different methods to legally obtain cannabis: buying from a pharmacy, joining a growing club or growing it oneself. The vision was that most Uruguayans would purchase from pharmacies. Part of this reasoning was born from convenience, since pharmacies already had computers that could access a national cannabis database. Many of the issues have centered around this plan of using the pharmacies to dispense cannabis.

One of the largest problems is that the government has not released final rules for pharmacies.

Without regulatory details, pharmacies are understandably cautious about selling cannabis.

Additionally, pharmacists express a variety of human concerns, like fear of retaliation from drug dealers, robbery and hesitation regarding a medical business distributing a recreational drug.

Part of the complications also stem from the regulations the executive branch has released so far.

The Instituto de RegulaciĂłn y Control de Cannabis declared the three different methods of obtaining November 2016 |

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cannabis mutually exclusive, e.g., if someone signs up for the home-grow registry, that person cannot buy from a pharmacy or join a club. The IRCCA also created a limited window to apply to have a home-grow, which has already closed. Every user must register, regardless of the method chosen. This ensures that users will only be in one system tracking their monthly allowable amount of 40 grams a month per person; the regulations technically state that home growers and collective members are held to 480 grams a year, 40 grams multiplied by 12 months, while pharmacy participants are limited to 10 grams per week, and no more than 40 grams per month.

Since only Uruguayans may register, this also prevents tourists from legally obtaining cannabis.

Culturally, Uruguay appears to have drastically different opinions about cannabis than the United States.

Though the details of these differences

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are beyond the scope of this article, the takeaway is that many of the aforementioned problems may stem from these cultural differences. Uruguay’s principle reasons for legalizing cannabis were to alleviate addiction, fight drug cartels by undercutting prices and provide safer products; tax revenue and popular demand were notably absent reasons.

Uruguay has allowed two companies, International Cannabis Corp and SIMbiosys, to grow so far for pharmacies and the first harvest occurred in July 2016. This product may only go to the small number of pharmacies that have gone through the cannabis registration process.

The IRCCA writes the cannabis regulations and administers the program and it is the first nationlevel cannabis agency. Hopefully, the IRCCA will release regulations in the near future that resolve some of the uncertainties, such as medical

cannabis guidance — prescriptions are required, but many more details are needed — or clarity for pharmacies, most importantly whether they will be required to carry cannabis or may opt-out. The IRCCA would also theoretically be in charge of enforcement, another area of Uruguayan cannabis law that could use more regulations for guidance and clarity.

Due to Uruguay’s special status as the world’s first recreational cannabis nation, it will be watched for years to come. In part as a result of its geopolitical situation and in further part from the country’s cultural attitude towards cannabis, the rollout of the program has not been what some had hoped. Also easy to forget, it is a small nation, with about half the population of Washington state.

Uruguay will likely improve upon its cannabis foundation, but it is unlikely to be a world leader or model nation in the cannabis revolution.

Marley’s

cannabis brand, Naturally

By Jon Slotnick

Unparalleled in influence as a reggae singer and musician, the legendary Bob Marley was also a global ambassador and proponent of cannabis, with marijuana use and culture forever linked to his music. Not surprisingly then, as legal and medicinal cannabis continue to work their way into the mainstream, it was only natural that Marley’s relatives would put the family name to a new cannabis-focused business venture — Marley Natural.

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Photoprofi30 / Shutterstock.com

It’s Bob

In early 2014, after searching for a potential partner for several months, the Marley family, led by Marley’s daughter Cedella and son Rohan, approached the cannabis investment firm Privateer Holdings about building the Marley Natural brand. It proved to be a perfect fit. “With Marley Natural, both Privateer and the Marley family share the same goal: to create a brand that upholds the ideals and legacy of Bob Marley in a respectful, authentic way that elevates the conversation about cannabis,” said Berrin Noorata, spokesperson for Marley Natural. “These shared values are at the root of our partnership.”

Privateer CEO Brendan Kennedy echoed Noorata’s thoughts: “By developing Marley Natural into a mainstream, socially conscious brand that remains true to his ideals of clean living, peaceful social change and positivity, we believe there is enormous potential to generate significant social and financial returns for our visionary shareholders.”

Launched at a star-studded event in a rented Hollywood Hills home on Feb. 6, 2016, timed to coincide with what would have been Marley’s 71st birthday, Marley Natural had been three years in the planning stage, and brings with it exceptionally deep pockets compared to other cannabis startups.

According to Fortune magazine, Privateer secured a 30-year licensing deal with the Marley family to develop cannabis strains and hemp-based products. The well-known marijuana-focused venture capital firm closed a $75 million round of funding in 2015 that will be dedicated to developing its select portfolio of cannabis companies.

Named after the colors of the Jamaican flag, Marley Natural’s primary product line consists of four cannabis strains, available in both flower and oil form. “Marley Green” features hybrid strains, combining sativa and indica. “Marley Red” is the company’s other hybrid offering, highlighted by CBD-rich strains. “Marley Gold” is the brand’s sativa product, while “Marley Black” is derived exclusively from indica strains. According to the company, all of

these offerings are sun-grown, as opposed to being cultivated indoors, using only sustainable growing techniques, without pesticides, fertilizers or other chemicals.

They are sourced from local growers where the company’s products are sold, with facilities in Northern California supplying California dispensaries.

In keeping with the company’s name and goals, that natural approach applies to its other two product categories, which also hit the marketplace with the 2016

company launch. One is a line of body care products containing hemp seed oil and Jamaican botanicals. The other is a collection of smoking, storage and preparation accessories made from sustainably grown American Black Walnut wood and heat-resistant, hand-blown glass. All Marley Natural products are tested and labeled for potency, purity and safety, according to company literature.

Because California has the

November 2016 |

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largest market for legal cannabis, it was selected by company management as the first state to carry Marley Natural products — currently available in 20 locations. Since the February launch, distribution of those products has already expanded to Oregon and other U.S. states where cannabis is legal, with plans to go international in 2017.

The privately held company declined to release sales figures or other specific financial data, but Noorata said that those numbers are growing steadily and have quickly exceeded original expectations, with the company’s cannabis flower and oil products showing the biggest growth potential.

The company’s stated mission is simple: targeting mainstream consumers who identify with Bob Marley and his ideology, which includes a focus on sustainability and peaceful social change. While those guiding ethics are said to inform the company’s culture and products, Marley’s name and enduring reputation give Marley Natural the kind of entrée into the global cannabis marketplace that competitors don’t have. “Almost everybody has a little Bob Marley on their playlist,” Noorata noted. “Because Bob Marley and his message are so universal, we believe the brand can have an international appeal.”

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Although the Marley family has already launched several other business ventures that leverage the singer’s name, with Marley fourth on Forbes’ most recent list of biggest posthumous money-earning celebrities as of 2015, the Marley Natural deal has attracted the most controversy. Recording Industry Professor Mike Alleyne, at Middle Tennessee State University, has suggested that the capitalist nature of Marley Natural goes against the grain of Marley’s anticapitalist and anti-establishment messages, pointing out that Privateer’s name and pirate ship corporate logo could have negative connotations in the family’s Jamaican homeland.

On a far more personal level, Marley’s bandmate and friend, Bunny Wailer — a reggae legend in his own right — expressed serious reservations about the company in the immediate wake of the Privateer deal announce-

ment on Nov. 18, 2014. He told The Gleaner, Jamaica’s leading newspaper, “The Marley Natural deal must be publicly opposed.” Wailer went on to say that, “Only a Jamaican company incorporating local stakeholders, the Rastafarian community, local ganja farmers, medical scientists and investors should be allowed to market Brand Jamaica Ganja first-hand. Every other company outside of Jamaica should follow suit.”

For its part, Marley Natural is spearheading Rise Up, described as a “social impact initiative,” in conjunction with the non-profit organization GlobalGiving, which connects donors with grassroots entrepreneurial projects around the world.

According to Noorata, “Rise Up funds projects that contribute positively to Jamaica and to communities that have been harmed by cannabis prohibition. In Jamaica, these projects are taking place across the island at places like Oracabessa Bay Fish Sanctuary, Farm Up Jamaica, Golden Valley Farmer’s Group and Occupy Pinnacle.”

While competition in the burgeoning international cannabis marketplace is sure to be fierce, Noorata remains unfazed.

“Our mission is to create positive change in the world and promote Bob’s legacy, voice and insight to help people realize the many benefits of cannabis for the mind, body and spirit,” she said. “As Bob would say, ‘One Love!’”

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Kush Bottles Packaging

STEADY PROFITS

By Jon Slotnick

ith California’s first medical marijuana bill approved by voters in 1996, players in the highly fragmented southern California cannabis marketplace have been battling for market share in the rapidly expanding industry for two decades now. In the face of stiff competition and a highly complex and constantly evolving legal landscape, one Los Angeles-based canna-business, Kush Bottles (OCTQB:KSBH), is already clicking on all cylinders, stealthily emerging as a local leader in packaging and other ancillary products.

When Kush Bottles founder Nick Kovacevich and business partner Dallas Imbimbo were attracted by the expansive potential of the emerging cannabis industry in 2010, they knew they wanted to get in on the action, but weren’t sure how. Although they already had some connections with Northern California growers and local dispensary owners, they felt that the confusing thicket of related regulatory uncertainty around “touching the plant” was too risky, as well as a significant barrier to outside investment. Eventually they seized on a strategy of producing and selling packaging products, “Just like Levi’s sold jeans during the Gold Rush,” Kovacevich said.

Despite the company’s growing success and arm’s length relationship with the plant itself, Kovacevich noted that Kush Bottles has regularly run into the same kind of resistance as growers, extractors and dispensaries: “Our

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affiliation with the industry and name has made landlords reluctant to lease to us and banks have closed our accounts. This may seem silly since we only deal in ancillary and plastic goods, but stigma is a real thing.”

Part of the company’s ongoing approach to overcoming that stigma is paying close attention to product quality and compliance. According to Kovacevich, “Regulation surrounding packaging has shaped our product portfolio and we continue to be a

“CUSTOMERS INCLUDE URBAN FARMERS, GREENHOUSE GROWERS AND MEDICAL AND RECREATIONAL CANNABIS DISPENSARIES.”

leader in offering compliant packaging solutions to cannabis businesses throughout the country.” Specifically, the company markets pop-top bottles; tubes; child-resistant exit, paper exit and foil barrier bags to prevent goods from escaping containers; and polystyrene, polypropylene and silicone containers.

Customers include urban farmers, greenhouse growers and medical and recreational cannabis dispensaries.

So far, so good for Kush Bottles, which generated more than 100% revenue growth year-over-year between 2014 and 2015, according to the company’s financial statements. In FY2014 annual sales weighed in at an impressive $1.8 million. In FY2015 that number jumped to $4 million, and the company has guided FY2016 sales in the $7 million-$8 million range, with $5.84 million already banked through the first three quarters of the year. Roughly two-thirds of the company’s revenue comes from packaging products, with the other third derived from a wide range of ancillary items, including lighters, grinders, gloves, glass and humidity packs.

While a glut of lesser companies rushed into the arena of publicly traded stocks trying to cash in off of investors’ short-lived, momentum-fueled enthusi-

asm for cannabis issues, management at Kush Bottles took a far more patient, measured approach. “We wanted to do it right,” Kovacevich said. “No reverse merger or funny business. This meant bringing on an experienced CFO, cleaning up our financial history, completing a full two-year audit, and filing multiple forms needing approval from the SEC, all of which took time.

We feel we are a little later to the party, but one of the most credible cannabis firms on the market.”

In January 2016, by the time dozens of over-the-counter listed cannabis companies had already crashed and burned, with many halted and suspended by the SEC, Kush Bottles stock made its debut. Trading on the OTCQB under the symbol KSHB, it’s been slow-sledding for shareholders thus far, with the stock changing hands in a narrow range of $1.00 - $2.50 per share, and trading volume averaging a nominal 28,000 shares per day to this point — most likely because the company has yet to turn a profit. But a series of recent and future catalysts could eventually put KSHB on investors’ radar.

Notably, with headquarters in

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Nick Kovacevich and business partner Dallas Imbimbo Orange County, California, one of the more culturally conservative areas of the Los Angeles area, the company has managed to attract the attention of several mainstream institutions.

In 2015 Kush was named to Inc. 5000’s “Fastest Growing Company in America” list, and was the highest ranked company within the cannabis industry. Last year also saw Kush Bottles hit the Orange County Business Journal’s Fastest Growing Companies list at an impressive ranking of #3, with the journal also nominating company CFO Chris Martin for CFO of the Year and recognizing Kovacevich with an Excellence in Entrepreneurship award.

In April 2016, the company launched a new product line called BudGloves — an original creation described as premium quality gloves that meet the specific requirements of the cannabis industry, providing customers with an affordable and effective solution for handling cannabis plants, extracts and other products. They are powderless, non-stick, food-safe, and manufactured to meet industrial-grade standards.

Kush Bottles announced another encouraging development at the end of July 2016 with the opening of a new regional sales and distribution center in the Seattle area of Washington state,

expanding the company’s footprint in the Pacific Northwest. The center includes 13,000 square feet of warehouse and office space, with advanced inventory, delivery, pick-up and dock loading capacity to accommodate growing order flow — along with the potential to add as many as 30 new jobs. The new Washington facility will join the company’s other brick and mortar operations in Colorado and Los Angeles, with Oregon currently Kush’s fourth biggest market.

Throughout his six years at the helm of Kush Bottles, Kovacevich has noticed a gradual change in the perception of the industry, which should accelerate quickly if Proposition 64 passes. “At first, everyone thought we were crazy to be in cannabis. Now, everyone wishes they were in cannabis.” Having already raised more than $2 million from private investors, the company is currently in talks with several institutions that have expressed interest in participating — another reason why Kush Bottles could have the chops to become one of the region’s leading publicly traded canna-businesses as legalization continues to spread.

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November 2016 |

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MED/EXTRACTS

The Future of Pharmaceutical Cannabis IN Europe

BY A n n e Wa l l a c e

he pharmaceutical future of cannabis should be bright. The in-depth chemistry of cannabinoids remains to be explored, but informal evidence on the plant’s therapeutic benefits continues to grow.

Revenue estimates are rosy too. According to a December 2015 report by Viridian Capital Advisors, New York, a firm that specializes in offering corporate development services to cannabis-related companies, revenues in the cannabis biotech/ pharmaceutical sector are projected to comprise 10 percent of the overall specialty pharmaceutical market over the next five years with a market size of at least $20 billion.

But the pharmaceutical reality in the United States is dim and seriously limited by cannabis’s classification as a Schedule I drug. The National Institute on Drug Abuse, which maintains a monopoly on legally available cannabis, has sharply limited its availability for medical research.

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The research, development and marketing of cannabis-based therapeutic drugs may have a way, though, with efforts focused overseas. Europe is shaping up as a friendlier venue, and the laws there are evolving rapidly. Seven companies, in particular, command attention.

What Does “Pharmaceutical” Really Mean?

U.S. Approval In the United States, the relevant agency is the FDA. The FDA will only consider applications for approval of therapeutic drugs after extensive testing designed to establish not only that the drug is safe for human consumption, but that it is effective for the treatment of a specific condition and that as a treatment option,

the potential benefits outweigh the potential risks.

FDA approval has long been the gold standard for prescribing physicians and a source of confidence for patients. It also dramatically increases the chances that health insurance companies will pay for medicines, an issue of great importance for pharmaceutical companies.

On the other hand, bringing an FDA-approved medicine to market may take years and is extremely expensive. A 2014 report published by the Tufts Center for the Study of Drug Development estimated the cost of developing a new prescription drug at $2.6 billion. With some exceptions, the process has also not been available to cannabis-based therapeutics because of the fundamental definitional problem presented by the Controlled Substances Act. There are exceptions. Drobinol, marketed as Marinol, is a Schedule III drug developed by Solvay Pharmaceuticals, a company based in Belgium (Euronext:SOLB). Nabilone, a Schedule II drug marketed as Cesamet, was developed by Eli Lilly and Company but is now owned by Valeant Pharmaceuticals International (NYSE:VRX) in Canada. Both have had FDA approval since 1985. GW Pharmaceuticals (Nasdaq:GWPH) has made recent inroads with Epidiolex, which is in the third phase of clinical testing. GW Pharma, which is based in the United Kingdom, is expected to seek FDA approval in the near future.

Nonetheless, the exceptions are rare and, so far, limited to synthetically produced cannabinoids.

In the absence of an avenue for FDA approval, the medical marijuana industry in the U.S. has taken the nutraceutical path. In the states where medical cannabis may be legally sold, state regulations typically provide assurance only that the product is free of contaminants and pesticides, that dosages are uniform and that the drug is not easily accessible by children. Evidence regarding efficacy in the treatment of disease remains

“The European system is often thought to be quicker than the processes in the U.S., but experience varies from drug to drug.� somewhat anecdotal and does not necessarily provide the assurance that many patients, doctors and pharmaceutical investors would prefer.

The EU System The United Kingdom and countries of the European Union, through the European Medicines Evaluation Agency, have an approval regime that similarly focuses on safety and efficacy in the treatment of disease. The EMEA has two systems that pharmaceutical companies can use to license drugs.

The first, a centralized system, is designed for drugs to treat AIDS, cancer, neuro-degenerative conditions or diabetes. The Committee for Proprietary Medicinal Products reviews drugs for human use, assesses the application and then recommends whether the drug should have marketing authorization.

The other route for approval is a decentralized or mutual recognition system. One member state assesses the application. If the drug is approved for licensure, the other member states may

agree or object. If all agree, the drug is given marketing approval. If some object, the CPMP decides.

Once a drug has EU marketing authorization, the developing company may apply to market the product in each individual country. In the U.K., it would apply to the Medicines and Healthcare Products Regulatory Agency. On approval, the product is launched, and doctors can prescribe it.

There are two key differences between the U.S. and E.U. models that are particularly worth noting.

In the E.U., approval in one country may ultimately open up a market within other E.U. countries. Secondly, whether medical cannabis is legal is determined on a country-by-country basis, but it is not uniformly prohibited, as in the U.S. The European system is often thought to be quicker than the processes in the U.S., but experience varies from drug to drug. The E.U. systems do not, in any event, provide a back door to the U.S. market.

Cannabis Legality in European Countries Although some European countries, particularly those in Eastern Europe and Scandinavia, retain strict anti-cannabis policies, enforcement is generally regarded as spotty and barriers appear to be crumbling rapidly.

The Netherlands legalized medical cannabis in 2003. In Austria, medical marijuana was legalized in 2008 and prosecutors were required to abandon the prosecution of many cases of possession for personal use.

In the U.K., medicinal cannabis November 2016 |

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disease, Alzheimer’s disease, ADHD, spasticity, pain, restless leg syndrome and Crohn’s disease using molecularly modified cannabinoids as neuroprotectants.

Research is underway in the Netherlands, and the U.K. as well as the U.S.

laws seem to be specifically tailored to particular products for use in the treatment of particular conditions. Sativex, a cannabis-derived medicinal spray developed by GW Pharma, was approved for use in 2010. Since then, several other products have made their way into the British market, including Charlotte’s Web hemp oil, Satipharm CBD capsules and KannaVape e-cigarettes.

Spain permits cannabis cultivation for personal, therapeutic use, and Sativex has been available since 2011.

Medical use of substances prepared with marijuana is legal in Italy, if provided by medical prescription.

The Czech Republic legalized medical cannabis in 2013. In the same year Romania and France legalized medical marijuana derivatives, but not the whole plant. In France, cannabisbased inhalers, pills and infusions became available to patients for whom no other treatments are effective.

The German Federal Health Minister, Hermann Gröhe, has said that Germany will legalize medical cannabis by 2017. Tweed Inc., a subsidiary of Canopy Growth Corporation (TSX:CGC), has begun exporting medical marijuana to Germany in order to fill the expected demand in advance of the availability of a domestically grown crop.

•

•

MMJ PhytoTech Limited (ASX:MMJ), Australia’s first listed multinational, vertically integrated medical cannabis company, has begun selling cannabis pills in Europe via a Swiss-based subsidiary, Satifarm.

The active ingredient in the medication, CBD, derived organically from cannabis, has been shown to help patients suffering from cancer, anxiety and epilepsy.

•

Bedrocan, originally based in the Netherlands, has produced medicinal-grade cannabis in that country since 2003. Through its various subsidiaries it also exports cannabis for medicinal use to Italy, Germany, Finland, Canada, the Czech Republic and to approved researchers around the world.

•

AXIM Biotech (OTCQB:AXIM), with its North American headquarters in New York, is actively involved in the research and development of therapeutics for the treatment of conditions such as Parkinson’s

What to Watch As with the state of medical marijuana laws, international medical cannabis commerce is highly volatile, and business prospects wax and wane quickly.

Nonetheless, some companies stand out already.

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GW Pharma’s drug Sativex, used in the treatment of muscle spasticity associated with multiple sclerosis, seems to have played a significant role in opening up European markets to additional cannabisbased therapeutics. Epidiolex, designed for the treatment of pediatric epilepsy, has received orphan drug status from the EMEA and is in Phase 3 clinical trials in the U.S. Both drugs are notable in that they make use of organically, rather than synthetically, produced cannabinoids.

•

Kalytera Therapeutics Inc., a pharmaceutical company developing a portfolio of proprietary cannabinoid and endocannabinoid-like medicines, is engaged in research to identify and characterize genetic abnormalities in persons with Prader-Willi syndrome that may contribute to the development of low bone mineral density and osteoporosis. Based in California, it partners with Yissum Research Development Company of the Hebrew University of Jerusalem Ltd and Ramot, Tel Aviv University’s technology transfer company.

•

Insys Therapeutics (Nasdaq:INSY) has FDA approval for its dronabinol oral solution, Syndros, a liquid formulation of dronabinol.

Syndros is approved for use in treating anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer. Although the American company’s immediate focus is in the U.S., it may ultimately choose to expand into European markets.

•

Finally, U.S.-based Zynerba Pharmaceuticals (Nasdaq:ZYNE) is a specialty pharmaceutical company focused on developing and commercializing synthetic cannabinoid therapeutics formulated for transdermal delivery.

Targeted conditions include epilepsy, osteoarthritis, fibromyalgia and peripheral neuropathic pain. Like Insys, it may ultimately move into international markets.

Pharmaceutical cannabis, with currently limited prospects in the U.S., may ultimately find greater market opportunity in Europe.

CannaPitch CannaPitch

March 5, 2017

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San Diego

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Sheraton Marina Pavilion

is Looking for a Few Good Entrepreneurs: Are You Ready?

More than 1,000 people filled the Denver ballroom at the Marijuana Investor Summit in April of 2015, eagerly anticipating the first CannaPitch. In less than two years more than a dozen companies have pitched and successfully raised millions of dollars in funding.

The Securities and Exchange Commission has issued new regulations allowing general solicitation for private companies raising capital. It is now legal to advertise your offering on the internet, in newspapers, magazines and billboards. The sky is the limit on advertising, or maybe not for those enterprising entrepreneurs who want to go the skywriting route or perhaps a biplane and banner. The new rules allow for both accredited and non-accredited investors to invest up to $50 million per company.

The CannaPitch team is ready and willing to teach you the rules to assure compliance with all securities laws, in addition to helping you develop your pitch, prepare your documents and assist with deal terms and valuations.

Be a part of our next big event in San Diego on March 5 at the Sheraton Marina Pavilion. Reserve your place now as the Pavilion holds 1,500 and we expect a standing-room only event. For those who don’t snag a seat, we will be live-streaming CannaPitch to anyone with internet access.

Are you ready to pitch? Email rshipley@cannafundr.com to get your place on stage!

November 2016 |

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CALIFORNIA COMPLIANCE

Navigating California Cannabis Legislation —

the Map to the

Green Rush

Key provisions in the new regulations include:

• Licenses: 17 different types of annual business licenses would be available, including indoor and outdoor cultivators of different sizes, plant nurseror a primary caregiver pursuant to the Compassionate Use Act, the Act does not ies, processors, testing labs, and dispensaries. A new class of business license consider a primary caregiver who cul— distributors — would be responsible tivates, possesses, stores, manufactures, for all transport between businesses. transports, donates or provides medical • Vertical Integration: It is possible cannabis exclusively for his or her for some types of businesses to have personal use or for the use of no more than five qualified patients and does not licenses in more than one category, i.e., some cultivators could own a dispensary, receive remuneration or donations as although the ability to own multiple types long as they are in full compliance with is limited. Businesses that are allowed to the Medical Marijuana Program to be exempt from the licensure requirements. operate in several different categories by July 1, 2015, could continue to do so until The Act states that Criminal penalties continue to apply to unlicensed individu- at least 2026.

• Cultivation Limits: The multiple als or entities. As the CDPH continues to develop the regulations, future timelines cultivation license types each have different limits on canopy sizes that must be will become available.

According to the legislation, several adhered to. Included are regulations on pesticide use and standards for organic agencies will regulate aspects of the medical marijuana. industry, but primary authority will be • Testing and Labeling: Both are given to the Department of Consumer Affairs. The department will be home to required for any and all products and a new Bureau of Medical Marijuana Reg- operators must adhere to the standards that will be set. ulation, which will oversee the program • Tracking: A new “track and trace” and share licensing authority for various system will be developed that requires types of businesses. The Department medical cannabis be tracked from the of Food and Agriculture will oversee earliest stages through sale. cultivators and the State Department of In order to be properly prepared, Public Health would be responsible for owners and operators need to get past testing labs and manufacturers. financials in order; create standard The new regulations implement a dual licensing system between local juris- operating procedures; work with local dictions and the state. Each business will communities on site approval(s); and establish proper governance and complibe required to obtain a permit or other ance procedures. authorization from its local jurisdiction Given the complex nature of the before it can obtain a state license. The laws, it may be wise to outsource some of law requires licenses for the cultivation, these compliance functions, including manufacture, distribution, transportalegal, accounting and business planning. tion, lab testing and sale of medical marijuana. During the licensing process, All external service providers should be carefully vetted, with particular attenthe Bureau will prioritize any entity that can demonstrate it was in operation and tion paid to their understanding of the regulations. in good standing with its local jurisdic*Paul Shively runs MJIC Compliance. tion by Jan. 1, 2016, as required by law.

BY Pa u l S h i v e ly *

he California Green Rush is on, but like most treasure hunts, it requires a map. The “X” marking the spot in the map provided by the California State Legislature seems a bit murky, so below are the highlights that investors and entrepreneurs need to know before setting out to stake a claim in the legal California cannabis fields.

On Sept. 11, 2015, the California State Legislature passed a series of bills that together would establish California’s first statewide regulatory system for medical cannabis businesses. Collectively, this legislation regulates the largest current legal market in North America and also creates a series of guidelines that will allow for-profit businesses to operate.

In part, the Act reads: The Medical Marijuana Regulation and Safety Act allows the issuance of and requires the licensing authority to allow, as soon as practical following Jan. 1, 2016, a qualified applicant for licensure to apply for, receive and renew a provisional license to engage in commercial cannabis activity.

While the Act does not apply to and shall have no diminishing effect on the protections granted to a patient

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INVESTING PART 1

Setting the Stage: Marijuana Investing in the United States

BY C h r i s t o p h e r Fa i l l e

T

his is the first column in a series that discusses the opportunities for and risks facing investors in the legal marijuana industry.

These first two columns, this one on the U.S. scene and one nearby on Canada, will remain rather broad and thematic but will set the stage for more granular discussions to follow.

The year 2016 will go down in the history books as a pivotal moment in the effort to end drug prohibition in the U.S., but the following words were written before the electoral dust had settled and they don’t attempt to predict that which you, dear reader, already know.

The Initiative States What is known though is that there are nine states with liberalization on the ballot: Arkansas; Arizona; California; Florida; Maine; Massachusetts; Missouri; Montana; Nevada. That list conflates the two different tiers of liberalization. Arkansas, Florida, Montana and Missouri are debating whether to join the state-legal medicinal tier. The other five listed states are debating whether to go beyond that and allow adult recreational use.

In the concise words of Morgan Paxhia, of Poseidon Asset Management, San Francisco, “California is the big one.” Victory there might even be “the final tipping point” in the defeat of government prohibition.

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Paxhia and his sister, Emily Paxhia, founded Poseidon Asset Management in 2013 to invest exclusively in the cannabis industry. With propitious timing, the fund opened to investors at just about the moment that Colorado opened dispensaries to adult use.

In a recent interview, Mr. Paxhia indicated that Poseidon’s focus is more on the “picks and shovels” of the gold rush, rather than on the gold itself. Poseidon looks to technology; in data mining, compliance software and so forth. It likewise looks to the logistics and equipment necessary for the industry.

Obstacles for the U.S. Industry The most obvious obstacle to the growth of the U.S. industry is that marijuana remains a Schedule I substance under the U.S. Controlled Substances Act. Sentences for persons who have violated this act by trafficking in listed substances, even non-violent first offenders, can become de facto life sentences, as separate transactions can be bundled together and awarded consecutive sentences.

It is sobering to recall that 10 years ago, in U.S. v. Angelos, a U.S. Court of Appeals upheld a sentence of 55 years for a man who had sold eight ounces of marijuana to a confidential government informant.

On Aug. 11, 2016, the Drug Enforcement Administration reaffirmed Schedule I status for marijuana, based largely on an evaluation from the Department of Health and Human Services, which said that the substance still “has no currently acceptable medical use for treatment in the United States.”

A related difficulty: much of the banking industry, which is regulated by the U.S. government, doesn’t want to touch the cannabis industry’s money, regardless of state legality.

But there do seem to be ways around this.

Mitch Baruchowitz, of Cavu Securities LLC, New York, said recently that the cannabis industry is “starting to get comfortable in a community bank

setting,” that is, using banks outside of the FDIC system.

A Sympathetic White House Congress could change the banking laws in a move that would entail fewer political risks for members than a direct attack on Schedule I itself. Still, any Congressional action easing the way for providing banking services to the state-legal industry would probably require the involvement of a sympathetic White House. It seems unlikely that a might-be President Donald Trump would play a constructive role in this.

A Hillary Clinton presidency might play a constructive role. Her party’s platform talks of “providing a reasoned pathway for future legalization,” after all. Paxhia said that he is confident Clinton and those around her are “well aware of the size of this industry.” They would not lightly impede its growth, then, given their own economic agenda.

There are burdens the industry must yet carry, then, but it has shoulders that may bear them. A final point, worth making even in a brief survey of the subject, is that resistance may well continue on the local level, the level of zoning codes and building inspections, even if the federal and state governments align behind broad liberalization.

According to a recent report in the San Diego Union-Tribune, San Diego, which has a population of more than 1.37 million, thus far has only eight dispensaries for medical marijuana, due to the street-by-street nature of the battles that have to be won prior to an actual opening.

The same level of resistance is to be expected in the event of a victory for recreational legalization. Such concerns may at least have the consequence of preserving this industry from premature hype and bubble creation.

green revolution in the U.S. should look to ancillary businesses, that is, to Poseidon’s “picks and shovels.”

Potential plays might include, for example, a company with mapping software that helps cannabis entrepreneurs navigate zoning and real-estate issues; a technology concern that adapts laboratory cannabis-testing equipment for direct sale to users;

or one that sells LED lamps that give indoor plants the most efficient light, while helping the growers economize on the electricity bill. Investment opportunities in the edible side of the industry, and in related biotech innovations that keep the medicinal value of cannabis while editing out the psycho-activity, also have their proponents, and deserve a look.

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Concluding Thought Many investment advisors suggest that investors looking to benefit from the November 2016 |

29

INVESTING PART 2

Marijuana Market Hype in Canada

BY C h r i s t o p h e r Fa i l l e

T

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he last few years have been full of

Liberals in Office

excitement for the marijuana industry in Canada, for its entrepreneurs and investors, in the wake of favorable legal and political shifts.

In 2008 the Federal Court of Canada’s decision in Sfetkopoulos v. Canada struck a blow still reverberating. It opened up the til-then very restrictive law on access to medical cannabis, holding that the restrictions violated Section 7 of the Canadian Charter of Rights and Freedoms.

Sfetkopoulos also illustrated a broader point, which has found other illustrations since. As Chris Bunka, the CEO of Lexaria Bioscience Corp. (OTC:LXRP), Kelowna, British Columbia, said in a recent interview, “the courts and the government do not see eye-to-eye.”

The courts continue to lead the way, “more liberal than the Liberals” on this issue.

But the dominant position of that Liberal Party, headed by Prime Minister Justin Trudeau, is another reason for the current atmosphere of optimism in the cannabis industry.

Legalization advocate Justin Trudeau, son of the late Pierre Trudeau, became the leader of the Liberals in April 2013. The 2015 elections made the Liberal Party the majority, and made him the country’s 23rd prime minister.

The Liberals, with 182 seats in the House of Commons, enjoy a clean majority — there are 338 seats in the House altogether — and the benefits of a divided opposition. The largest opposition party, the Conservatives under Rona Ambrose, now have 98 seats and the New Democratic Party has 44. The Bloc Québécois and the Greens account for the remainder.

The Liberals came into office committed to a marijuana legalization program. But as close observers of the politics of cannabis — including Deepak Anand, the executive director, Canadian National Medical Marijuana Association — have observed, legalization does not simply mean the repeal of existing restrictions and prohibitions, it means the creation of a new adults-only system for recreational use with appropriate controls on both production and distribution.

The Trudeau administration has created a task force, and expects to have a proposal ready by the spring of 2017.

No Wall of Worry There is an old saying, though. A rising market is said to “climb a wall of worry.” There have to be sellers in order that there can continue to be buyers, and somebody has to be worried enough to sell or the market has become over-bought and is ripe for a correction. The reason to be somewhat concerned about cannabis-related investments in Canada right now is precisely that there hasn’t been enough tempering worry of late.

One narrower issue, connected to that broad point, is that the political culture in Canada has long been remarkably tolerant of marijuana use, whether it occurs through officially approved channels or not. Consider the approved medical use. Under the Marihuana for Medical Purposes Regulations, the system in effect until Aug. 24, 2016, there was to be no brick and mortar dispensaries for medical marijuana. A user should receive marijuana through the post, or from a doctor who would have received it through the post.

Nonetheless, there were brickand-mortar dispensaries, and they operated quite openly. Sometimes they were ticketed, but the ticketing was a hit-and-miss matter, and the charge that one had bought or sold cannabis in unauthorized ways in Canada was not at all the life-changing event in Canada that it so often is in the United States.

On Aug. 24, a new set of rules replaced the MMPR. The new system, the Access to Cannabis for Medical Purposes Regulations, though, makes no change as to the de jure prohibition on brick and mortar, nor does ACMPR seem likely to change that distribution method’s de facto acceptance.

In human terms, this tolerance is very good news and speaks well of the country. In financial terms, though, this cultural fact limits the investment attractiveness of those official channels — of the Licensed Providers within the medical system and whoever may be their equivalent within a forthcoming adult/recreational system.

If the existing black or gray market for marijuana continues to be, for many users, the easiest way to obtain marijuana, if it continues to operate without stigma, then there will be less value to investments in the “white” market than one might think, were one not cognizant of that prospect.

“Less direct green investments, such as those in related biotechnology firms, may weather the coming markdowns rather well.”

Excessive Hype A related point: marijuana at home, by or for the ultimate consumer. This was until very recently disallowed under the existing medical-use system.

In February 2016 the Federal Court issued the Allard decision, which enjoined the government to produce a new set of regulations within six months that would include some provision for personal growing. That in turn pressed the government into instituting ACMPR, which allows patients or their designated caretakers to produce a limited amount of cannabis for their own medicinal purposes. For these and other reasons there is some concern that the hype in Canada has been excessive, and that over time realism will inject itself into the hopeful spirit that prevails in the market now, with predictable consequences for valuations.

The consequences of this realism will likely hit a number of the licensed producers whose stock sells on the OTC market, including for example Pharmacan (OTC:PRMCF), Aphria (OTC:APHQF) and Aurora (OTC:ACBFF). In some ways perhaps the most vulnerable stock going forward is one that is listed on the TSE, Canopy Growth Corp. (TSE:CGC), because a firm that leads the pack on the way up is a good candidate to lead the pack on the way down.

Less direct green investments, such as those in related biotechnology firms, may weather the coming markdowns rather well. Chris Bunka’s Lexaria Bioscience (OTC:LXRP) falls into this camp. Likewise, Naturally Splendid (TSXV:NSP), Vancouver, British Columbia, with its goal of “applying science to the medicinal CBD industry,” does not look overbought, and might benefit from an exclusive agreement to distribute a Swiss brand of CBD skin care products.

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Israel AT THE Helm:

Medical Cannabis Research Spurs Technology Innovation

By J e n K n ox

lobal demand for technology innovation in the medical cannabis industry is staggering. As the industry grows, patient access to cannabinoid-based medicines is improving, but many patients who could benefit from cannabis never receive adequate information about their options. The barriers to expanding and improving medical cannabis applications in the United States, for instance, are largely regulationbased and boil down to outdated text that stifles research and development, thereby stalling innovation. After all, we can’t have innovation without information.

Science-based research into the curative benefits of the cannabis plant will change the way the world views cannabis in terms of healthcare, but these views are not changing rapidly enough to keep pace with industry expansion. Cur-

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rently, there are many patients who only come to medical cannabinoid-based treatments after spending years suffering from painful or debilitating conditions. This was the case for Jason Ryker, co-founder of iCAN Israel-Cannabis.

Ryker spent six years suffering from chronic fatigue syndrome. It was only after exhausting other alternative therapies that he experienced, first-hand, the transformative benefits of medical cannabis, which improved his quality of life dramatically. He and co-founder Saul Kaye, a good friend Saul Kaye, CEO of of Ryker’s, recogiCAN Israel-Cannabis nized that innovative healthcare companies could only reach more patients if there were greater opportunities to invest in R&D innovation, more networking events available to

global companies, more people speaking out and speaking up on behalf of the plant, and a greater collective knowledge base from which to grow a stronger collective industry.

Saul Kaye explained to MJINews that his motivation to begin this company came after watching his friend remain needlessly bedridden for years.

He explained that seeing the benefits of medical cannabis personally spearheaded iCAN: “From that point on, I have been driven. I formed a team driven by accelerating cannabis innovation and creating a platform for collaboration.” The company has since represented what is possible in the global industry when companies partner and share information.

Because the company was founded on the realization that patient needs can only be met if adequate investments are made into R&D, it is no surprise that iCAN is headquartered in Israel, the center of scientific and technological innovation in the cannabis industry. It is here that the company hosts its annual conference, CannaTech, to recognize groundbreaking companies and provide them an opportunity to connect and find inspiration necessary for continued invention and modernization of technologies.

By highlighting scientific and technological research in order to get real solutions to patients in need, the CannaTech conference has become a catalyst for the industry’s evolution.

tions from service and dosage precision to optimization of systems and delivery of cutting edge therapies that can ameliorate pain and resist or slow disease progression.

The medical cannabis industry in the United States has seen incredible growth over the last few years. According to ArcView Market Research, it has grown to more than $4.5 billion in 2015, up from $1.5 billion in 2013. Although the global cannabis industry, and the U.S. specifically, is seeing incredible growth in medical cannabis sales, research opportunities in the U.S. are limited.

The U.S. Controlled Substances Act still classifies cannabis as a Schedule I substance, and the fact that the medical cannabis research base is still nascent continues to be a significant barrier to facilitating effective scientific studies in America. Consequently, cannabis research continues to be more difficult to execute than research on cocaine or even methamphetamines. Efforts are underway to change this.

U.S. Senator Kirsten Gillibrand, DN.Y., along with 26 other senators and representatives sent a formal letter to President Barack Obama on April 15, 2016, requesting a removal of barriers to research in the medical cannabis industry. The letter proposed that the president direct the DEA to conduct a review of Schedule I restrictions of medical cannabis. Despite this effort from legislators, however, there is more

work to do in the U.S. to establish best-in-class cannabis R&D capabilities.

In order to keep pace globally, U.S. entrepreneurs and technology innovators must find ways to connect with global communities that operate under less inhibitive research conditions.

Israel — The Silicon Valley of the Global Cannabis Industry In Israel, the potential medical impact of cannabis is being viewed as an exciting breakthrough that will expand the medical treatment landscape. Citing Israel as the optimal site of innovation and investment, Saul Kaye noted the importance of speaking out, attributing much of the industry advancement to forward thinking. “We had a researcher with enough chutzpah to ask to study a plant, we have patients and parents with enough chutzpah to demand a treatment for themselves, and we had a regulator who was willing to listen,” Kaye said during the 2016 CannaTech conference.

Redefining Cannabis in the Eyes of Legislators The way the world views the contribution of cannabis to global healthcare is changing, albeit slowly. With research efforts and increased awareness, the benefits of cannabis to modern medicine are being clarified and more accurately portrayed, and technology solutions are emerging that enhance and expand existing healthcare soluNovember 2016 |

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The “chutzpah” is working. Medimultifaceted clinical research efforts cal cannabis efforts in Israel are demol- and a spotlight on new consumer use ishing barricades to cannabis innovadevices continues to feed the country’s tions around the world, and this is in competitive advantage. no small part possible because there is In 1964, Professor Raphael a cannabis culture in Israel that speaks Mechoulam, along with Yechiel Gaoni, out and gets things done. uncovered and isolated At the center of this tetrahydrocannabinol, In Israel, the research in Israel is a colmore commonly known lective effort to rebrand as THC. Mechoulam potential and reframe the way the has since continued his medical impact pioneering research into world views cannabis and of cannabis is its healthcare applicathe chemical compositions, and to highlight being viewed as tion and pharmacolexisting clinical research ogy of cannabinoids in an exciting in order to share insight Israel. In his keynote breakthrough into the potential health speech at iCAN’s 2016 benefits of this complex that will expand CannaTech Conference, plant. When it comes to he recalled starting the medical realizing and recognizing research in cannabis at treatment best-in-class companies, a time when the U.S. the global cannabis landcompletely dismissed his landscape. scape is changing, and efforts as irrelevant.

Israel, which has long Now, more than 50 been at the helm of medical cannabis years later, the relevance of medical research and technology, is now a cannabis globally is so extensive that magnet for innovative U.S. compaendocannabinoid applications promise nies seeking to expand reach. to offer results in myriad scenarios, Israel has become the epicenter of from neurological to physical sympworld-class medical cannabis research toms that can be resolved, prevented due to a convergence of innovative or eased with the right dosage. phytochemical studies, coupled with The Medical Cannabis Unit in

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Israel is the health division authorized in the Ministry of Health that regulates medical cannabis research and issues patients with permits to use cannabis for medical purposes. It operates on the principles that cannabis is considered “so far as possible” in the same manner as any other medicinal product.

It should be noted that cannabis is still classified as a dangerous drug in Israel, meaning it is regulated as any other narcotic. Meanwhile, the Ministry of Health’s stated commitment is “to all that pertains to the supply of cannabis is no different — neither greater nor less — from its commitment regarding any other medicinal product that is not essential in emergencies and is not included in the health basket.”

Global Companies Breaking Barriers with Technology Advancement Partnership creates progression. Many companies have identified the need for global outreach and partnership in order to propel their technologies and discoveries with solid scientific studies. A few such companies that have a global presence include: Cannabics Pharmaceuticals (OTCQB:CNBX),

Eybna Technologies, Syqe Medical and One World Cannabis Pharmaceuticals (OTCQB:OWCP).

Companies such as Cannabics Pharmaceuticals are proving the necessity of completing scientific research in order to develop effective treatments from cannabinoids. The company, founded in 2012 by Israeli researchers, works from a knowledge base of molecular biology and cancer research to examine the medical use cases for cannabinoids.

Based in the U.S., Cannabics is able to research and perform clinical studies without barriers because its R&D is based in Israel and licensed by the Ministry of Health. Specifically, the company is one of the few that makes precision dosing solutions, in the form of essential oil in soft gel capsules, and conducts clinical trials to demonstrate cannabis’s effectiveness against debilitating conditions related to chronic diseases.

Cannabics is planning to con-

tribute substantially to the body of research proving such benefits. The company is currently in the midst of conducting a study on the use of Cannabics SR capsules as a means to manage the enervating symptoms of cachexia and anorexia among patients with advanced cancer. This study aims to recruit 40 participants in order to test if there is a positive association between the use of 10 mg of Cannabics SR capsule and a positive change in baseline weight of greater than or equal to 10% over the course of 3 months of treatment. The results of this study are expected to completed

by August 2017.

One World Cannabis Pharmaceutical Research Corporation has also recognized the importance of reaching out to Israel as opposed to sitting around and waiting for the states to catch up and revise legislature. The company realizes that innovation cannot wait, stating that “patients can benefit earlier if we take a global view.”

As a result, One World Cannabis Ltd., a wholly owned Israeli subsidiary of OWC Pharmaceutical Research Corp., was founded to focus on “discovering, developing and commercializing cannabis-based novel therapeutics products and treatments specifically designed for several medical conditions, starting with multiple myeloma, psoriasis, fibromyalgia, PTSD (posttraumatic stress disorder) and migraines.” The company recognizes that patients cannot wait, medical professionals cannot wait, and that every discovery is crucial in the medical cannabis industry.

Of course, as medicine, cannabis must be properly understood from a chemical and scientific perspective.

Precise insight into the way cannabinoids should be isolated and dosed for various diseases is necessary to establish credibility. In order to successfully complete this type of research, the specific benefit-imparting compounds in the cannabis herb must be first

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chemically isolated, but this means going beyond simply isolating THC and cannabidiol, more commonly known as CBD. According to Eybna Technologies Ltd, a global leader in R&D for terpene-based solutions, there are over 70 unique and potentially useful compounds found in cannabis, most of which are found in female flowers.

Many of these compounds, such as the less commonly known cannabinol, cannabigerol and cannabichromene are currently being tested for a broad range of potential health benefits including pain relief, sleeping aids, anti-inflammation and a wide range of chronic disease conditionspecific treatments.

Beyond cannabinoids, Eybna Technologies has isolated a number of flavonoids. These essential oils impart flavors and fragrances that have applications in food and beverage, perfume manufacturing and the development of innovative personal care products. Such flavonoids include apigenin, an antioxidant; quercentin, a plant pigment that is also an antihistamine; and beta-sitosterols,

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which are phytosterols that could help reduce cholesterol. The company has also isolated a number of terpenes that could have a wide range of health applications, and this is the focus of the company’s future research.

It should be noted that the potential consumer benefits of cannabisderived flavonoids and terpenes go beyond health and wellness, which has been recognized by Eybna Technologies and other Israel-based companies as well. According to Murray B. Isman, professor of Applied Biology at the University of British Columbia, there is even research underway to better understand the use of terpenes as a natural crop protection chemical against pests and plant diseases.

Another leading company, Syqe Medical, is at the forefront of the convergence of advanced cannabis phytochemical technology, the development of innovative precision dosage solutions, and ground-breaking clinical applications. Syqe Medical, founded

by Perry Davidson, is led by a team of world-renowned medical cannabis experts that was able to apply advanced

phytochemical technology in the development of a medical device, specifically a precision-controlled inhaler that is able to give standardized doses of THC or any other cannabinoid of interest. This device enables medical professionals who are on the fence in prescribing a medical cannabis product to their patients a new means to ensure proper dosing requirements and a perceived safer way of administering the product.

However, Syqe Medical has gone one step further in substantiating the effectiveness of its product in managing chronic neuropathic pain. In a 2014 study published in the Journal of Pain & Palliative Care Pharmacotherapy, the researchers Elon Eisenberg, Miri Ogintz and Shlomo Almog conducted a Phase 1a study on the efficacy of using a Syqe Inhaler device containing a single 15.1 Âą 0.1 mg dose of cannabis as a means to reduce chronic neuropathic pain.

Ten participants completed the open label study, and key secondary outcomes tested included self-reported pain reduction from a pain intensity

baseline. The study was conducted us- iCAN — A Platform for ing a 10-point pain scale, the self-reAccelerating the Cannabis ported degree of satisfaction of using Industry’s Amalgamation the Syqe device, and key biomarkers Stories of patients who suffered including adverse effects, blood presneedlessly from pain due to lack of sure and heart rate. The researchers education or lack of research into the found that self-reported pain intensity ameliorative and curative effects of dropped a statistically significant 3.4 cannabis are everywhere. While perbasis points 20 minutes after using sonal experience propelled Kaye and the Syqe device.

Ryker to create iCAN, their message is Technology companies, such as gaining steam around the world. They Sage Analytics in Boulder, Colorado, recognized that as investments into have proven that U.S. companies medical cannabis research increased, it are beginning to look at would become clearer to real solutions to medical key stakeholders—from cannabis issues, such as medical professionals to Israel and dosage control and actheir patients—that medits network curacy. Having recently ical cannabis researchers of medical launched the Luminary have only tapped the Beacon, which allows cannabis experts surface of what we know testing of products with about how to utilize the have become spectroscopy technology, cannabis plant. the beacon one which is used in the iCAN is able to pharmaceutical indusfacilitate this by bringing of scientific try, the company shows the best minds discovery in the together what kind of precision is from multiple fields medical cannabis within the global cannapossible. And such technologies, when applied bis arena. The CannaTspace for the to the medical cannabis ech conference is three entire world. space, can change the days long and historically impact of cannabinoidheld in Tel Aviv. With its based treatments. Such focus on strengthening the community technologies can also work to demysof cannabis technology companies, tify the process of precision prescribit is gaining a reputation globally for ing, thereby cutting down on blanket providing companies and researchers a prescriptions or weak product knowl- platform from which to educate, share edge by medical professionals. best practices and connect with other, As regulations ease in the U.S., like-minded movers and shakers. opportunities will be strongest where During the CannaTech 2016 global innovation and the hard Welcome Speech, Kaye explained that scientific evidence meet. InvesIsrael is the perfect place for medical tors would be wise to look to such cannabis education and innovation groundbreaking companies, and to because its regulators listen, its patients those who secure strategic partnerspeak up and out, and the country ships around the world. As patients is home to some of the best groundand healthcare professionals alike breaking research efforts. The rest of will be more informed and better the world should take note. equipped to properly treat and Kaye and Ryker saw an opporameliorate illnesses with cannabitunity to expand upon Israel’s reach noid-based drugs, there will be more when they founded iCAN. “My dream opportunity for all aspects of the was to showcase innovation and to cannabis industry to be strengthstart a global platform for collaboraened, leading also to a strong base of tion, incubation of ideas, and a vehicle research for supplements and other to invest and nurture this industry,” over-the-counter applications.

Kaye said in his introduction. He then

turned the podium over to Professor Raphael Mechoulam, who reflected on the progress of the industry as well as the sustaining obstacles.

With iCAN, Kaye and Ryker have successfully created an open market for ideas related to the medical cannabis industry that facilitates industry integration, collaboration and a means to consolidate, scale-up and direct industry R&D investment toward the common goal of producing scientifically-substantiated cannabis-derived health products. Or, more simply put, iCAN has developed into an innovation incubator for the entire global medical cannabis industry.

Upward Momentum The growth of the global medical cannabis industry is impressive. Perhaps the day will come when we all look back and collectively scratch our heads, trying to tease out why it took us so long to fully understand the potential of the cannabis plant. The medical cannabis industry has great potential and a growing body of research that seems to point to the fact that although cannabis is not a panacea, it is a plant with a great many medicinal applications that have yet to be fully understood.

With more precise, scientific attention to the compounds in the cannabis plant and with more rigorous studies, the accumulation of knowledge will eventually spread, even to slow-accepting market segments. While archaic regulatory barriers are still inhibiting R&D efforts to address the health and wellness needs of potential consumers, there is now an avenue for researchers around the globe to turn to in order to advance the sciencebased technologies, and the industry as a whole. This means great opportunity for forward-thinking companies in the U.S. Israel and its network of medical cannabis experts have become the beacon of scientific discovery in the medical cannabis space for the entire world, and although many countries are slowly waking up to realize the expansive potential of this plant, they are, in fact, waking up.

This is just the beginning for a global industry with upward momentum.

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