WWW.MARIJUANAVENTURE.COM VOLUME 2 / ISSUE 2 M A R I J U A N A

THEVENTURE JOURNAL OF PROFESSIONAL CANNABIS GROWERS AND RETAILERS

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DEATHWILL WASHINGTON BUSINESSES BE ABLE TO SURVIVE? TOMMY CHONG FAMED FUNNY MAN CREDITS CANNABIS FOR LIFE, CAREER THE NEXT FRONTIER ALASKA PREPARES FOR LEGALIZATION

FEBRUARY 2015 $6.99

JE SUIS CHARLIE!

A MESSAGE FROM THE PUBLISHER Collapsing prices reveal Washington’s problems Cannabis regulations must mirror those in other industries couple weeks ago tential business killers, you end up in an AI received one of industry where the end costs to the con- those phone calls I sumer are grossly inflated. Combine those knew I was eventually costs and that environment with a parallel going to get, but dread industry — medical marijuana — that is just the same. A Wash- competing for the same customer, but with ington State-licensed a completely different cost structure and Tier 1 grower, who minimal — or no — regulations and tax- PUBLISHER had been selling marijuana profitably since es, the results are predictable, and exactly GREG JAMES early summer, was in trouble. His predic- what we’re now seeing. And it will likely [email protected] ament was fairly straightforward — when get worse in the future. the wholesale price he sold his marijua- Legal recreational marijuana in Wash- EDITOR na for was $7-10/gram ington is going to go the GARRETT RUDOLPH ($3,500-4,000/pound), THE REASON way of the Dodo and the [email protected] life was good. Once it typewriter unless some- SALES MANAGER dropped to around $4/ FOR THE DROP thing changes quickly. gram ($1,800/pound), And, there are only two LISA SMITH he was barely breaking IS CLEAR — TOO routes to a healthy legal [email protected] even. recreational industry: (1) STAFF WRITERS The same laws of MUCH SUPPLY, radically alter and mod- supply and demand ify the current rules and CHRIS BAYLEY that govern everything TOO LITTLE regulations that govern PATRICK WAGNER from crude oil prices DEMAND. the legal industry. Make CONTRIBUTORS to orange juice futures them simpler, less costly Ben Adams David Kerr hit him squarely in the face, as too much and more like any other regulated busi- Joy Beckerman Aaron Stancik supply tried to squeeze into too few retail ness. (2) Level the playing field. There Michele Brooke M. Scott Sotebeer outlets. is no way one industry can exist and be Neil Juneja Colette Thomas Discussions with other producers and profitable, when another, selling the same MARIJUANA VENTURE VOL. 2, ISSUE 2 a couple retail buyers seemed to confirm product, has an enormous cost advantage Marijuana Venture (ISSN #2376-0710) is published that the price state-licensed growers are at every level. Untaxed, unregulated med- monthly by MJ Directions LLC. PO Box 1419, Renton, WA, 98057. Phone: (425)281-1348. Website: www.mari- getting for quality marijuana dropped ical marijuana sales are killing the I-502 juanaventure.com. Copyright 2015 by Marijuana Venture. precipitously from the end of summer to experiment before it’s even had a decent All rights reserved. Reprinting, in whole or in part, is expressly forbidden without written permission from the where we are today. In rough numbers, it chance to prove itself. publisher. fell about 50% in a little more than two It’s that simple. ADVERTISING months. In 2012, Washington took the plunge For advertising rates, call (425)281-1348 or email Greg@ The reason for the drop is clear — too to legalize and regulate a product that a MarijuanaVenture.com. much supply, too little demand. The fac- huge number of people thought should SUBSCRIPTION SERVICES tors behind the imbalance are a bit more never have been illegal in the first place. For subscription services, please call (425)281-1348, visit www.marijuanaventure.com or email Editor@Marijua- complicated, but still fairly easy to under- That was step one. Step two is a bit more naVenture.com. For change of address, please include the stand and predict. complicated, but is critical to the new in- old address and new address, along with an address label from a recent issue, if possible. Please allow up to three Let’s not mince words here. The li- dustry’s success: The marijuana business weeks for address to be changed. If an address is not up- censed, regulated marijuana business is a needs to operate in an environment that is dated when the magazine is mailed, we are not responsible for delivery of your magazine. If the Post Office alerts us very costly industry to enter. When you more or less the same as liquor, tobacco that your magazine is undeliverable, we will suspend our combine extraordinarily high tax rates or gaming. Taxed and regulated yes. Taxed subscription until a correct address is received. with strict regulations that govern where and regulated out of business … no! Marijuana Venture assumes no responsibility for any claims or representations contained in the magazine or you can locate, who can operate the busi- in any advertisement. All materials contained are for ed- ness, mandatory security and reporting ucational purposes and intended for the legal marijuana GREG JAMES business where allowed by state law. Marijuana Venture rules, inefficient storage and shipping does not encourage the illegal use of any of the products regulations, and a whole host of other po- PUBLISHER contained within.

2 | Marijuana Venture // February 2015

FEATURES TABLE OF CONTENTS 22 | Tim Cullen Former biology teacher has become a cannabis industry leader in Colorado 28 | Taxed to Death Washington businesses feel the pressure of overwhelming excise taxes 36 | Tommy Chong Still smokin’ after all the years, and still one of the biggest cannabis supporters 38 | Alaska Entrepreneurs prepare for rollout of cannabis industry regulations 52 | Legal Pages Alaska’s unique challenges, strict liability and the maintaining compliance 66 | Strains The conclusion of the two-part series on strains and strain selection 70 | Hemp The truth about cross-pollination between industrial hemp and marijuana 76 | GreenBroz San Diego-based company emerges as a leader in processing machinery 80 | Beyond Buds An excerpt from Ed Rosenthal’s most recent book on cannabis extracts Above: Clones from Rainforest Farms in Alaska. GUEST COLUMNS About the cover: Two jars of 86 | Aaron Stancik cannabis cure in the Alaska 90 | M. Scott Sotebeer sunshine with the beauti- 94 | Colette Thomas ful Arctic landscape in the background. Photos courtesy Rainforest Farms. OPINIONS 2 | Message from the Publisher MJVenture 96 | Letter from the Editor

www.marijuanaventure.com | 5 CANNABIS CALENDAR

Attendees listen to speakers at the first International Cannabis Business Conference.

Feb. 7: The first session of a series on More information: www.cannabiscup. More information: cannacon.org. regulatory compliance will be from 9 a.m. com/southern-california. to 4 p.m., Feb. 7 at Seattle University. March 7-8: The Maximum Yield In- The event will be presented by DK Law, Feb. 15-16: After a successful showing door Gardening Expo will put on the first and will feature a guest speaker from the back in 2014, the International Cannabis of four scheduled trade shows March 7-8 Washington State Liquor Control Board. Business Conference opens 2015 with an at the Washington State Convention Cen- The first half of the seminar will include event in San Francisco. ter in Seattle. security, traceability, regulations on pro- The business conference will be at the The event is expected to feature hun- duction, transportation, storage, record Hyatt Regency, and will feature keynote dreds of exhibitors, interactive displays, keeping, testing and more. speakers Dr. Carl Hart, a drug addiction seminars and expert panels. The opening The second half will address penalties expert, and travel writer and TV host Rick day of the show is industry only, with a and how to defend yourself from possible Steves. The conference will address the schedule that includes complimentary a violations. latest in cannabis legislation, in addition VIP seminar and discussion followed by More information: www.cannabiscom- to being an opportunity to network with six hours of exhibit time to network, inter- mercecompliance.com. some of the biggest names in the industry. act and do business. More information: internationalcbc. The second day of the show is open to Feb. 7-8: The fourth annual SoCal Med- com. the public. Last year’s event prohibited ical Cannabis Cup will be held at the NOS discussion of marijuana on the first day. Events Center in San Bernadino, Califor- Feb. 18-21: CannaCon moves to Se- There will also be gardening expos in nia. The two-day event features a trade attle for its second industry trade show. Chicago, Los Angeles and Boston later in show and expo in a main building, with The event is dedicated to creating lifelong the year. an extended outdoor component and ad- partnerships in the emerging cannabis in- More information: www.indoorgarden- ditional booths. Booths range from glass- dustry. expo.com. ware and clothing to grow equipment and CannaCon will be at Bell Harbor Inter- artwork. There will also be three seminars national Conference Center at Pier 91 in March 16-18: Pacific Northwest resi- per day that cover legalization regulations, Seattle. The three-day show begins Feb. dents won’t have to travel far for the Na- political issues and more. 18. Tickets can be purchased online. >> CONTINUED ON PAGE 8

6 | Marijuana Venture // February 2015

CANNABIS CALENDAR

<< CONTINUED FROM PAGE 6 to showcase industry products and make sary owners, private equity leaders and top tional Cannabis Industry Association’s valuable business to business connec- lawyers. With Illinois recently joining oth- Cultivation Management Symposium, tions.” er states that have legalized medical mari- which is slated for a venue to be deter- More information: www.oregonhemp- juana, there will also be a “marijuana busi- mined in Seattle. convention.com. ness crash course” — a workshop for new This three-day conference will show- business owners in the cannabis industry. case presentations from leaders in the can- May 15-17: The Alaska Cannabis Clas- Consumers and the general public are nabis cultivation arena. From horticulture sic is the first stop on a tour of three trade not invited to Marijuana Business Confer- techniques to the best business practices of shows and cannabis competitions that will ences. running a grow operation, the cultivation feature events in Tacoma, Washington and More information: mmjbusinessdaily. management symposium will bring to- Portland, Oregon later in the year. com/conference. gether the best and brightest from around The three-day kick-off event at Fox the country. Hollow Sports Dome in Anchorage will Aug. 15-16: Hempfest weekend in Seat- More information: cannabisbusiness- include vendors, product demonstrations, tle just got a whole lot busier with the in- summit.com/cultivation. informative seminars, hemp fashion show, troduction of the Hempfest Business Show live music and networking opportunities. at the Seattle Center Exhibition Hall. March 28-29: The Oregon Hemp Con- The competition will feature local- This inaugual event is about creating an vention is geared toward business owners, ly-produced cannabis products with an environment where Washington’s flour- investors, wholesalers, manufacturers, awards show to follow. ishing medical and recreational cannabis growers, retailers and license applicants. More information: nwcannabisclassic. industries can flourish and mature. The two-day event will begin March 28 com. It will run concurrently with Seattle at the Portland Expo Center. Admission is Hempfest, which will be taking place just free to the public. May 19-21: The Marijuana Business minutes away. Vendors will display the According to organizers, “It is our mis- Conference and Expo will hit Chicago for latest in cultivation equipment, packaging, sion to provide a global venue for consum- a three-day, business-only event that is ex- marketing, web design, insurance, nutri- ers, growers, canna-businesses, entrepre- pected to have more than 125 exhibitors ents and more. neurs, investors and community partners and 70 expert speakers, including dispen- More information: www.hempfest.org.

16 rooms 44,000 square feet FOR SALE $2,400,000 Large, insulated industrial warehouse on 14 acres of irrigated ground located in Okanogan County, Washington. The property is just off Hwy. 97 in Tonasket, about 20 miles south of the Canadian border, and could be a prime location for a Cannabis business. CALL 509.322.4732 OR EMAIL [email protected]

8 | Marijuana Venture // February 2015

BUSINESS PROFILES

Company: The Novel Tree City: Bellevue, Washington Employees: 12 Most popular products: Sativas Top vendors: “Producers and proces- sors that keep the end user in mind and that are genuinely passionate Allie Charneski and about cannabis.” Chris McAboy. Will your business be next? Interested in having your business profiled in Marijuana Venture? Each The Novel Tree month, magazine staff will feature Rustic interior decorations create a cabin-like theme different growers, retailers and By Patrick Wagner specialty businesses in a short profile section. For more information, or to BELLEVUE, Wash. — While some rec- store and we both are genuinely passionate pitch a company to be featured, send reational marijuana stores have found their about pot. It was just a good opportunity an email to Editor@ origins as side projects for affluent busi- and a great point in our lives to move for- MarijuanaVenture.com. ness owners or investment opportunities, ward with this.” The Novel Tree in Bellevue grew from a Charneski was originally hesitant to take quets of blown glass. simple conversation between Allie Charne- the leap. A 12-person staff serves customers all ski and Chris McAboy. “It was Chris’ idea initially and it did the popular strains and products the shop It took the two co-owners roughly a year take me a second to be fully on board,” carries. Both Charneski and McAboy knew of planning and discussing the venture be- Charneski said. “After I read the rules and that they wanted to be on the east side, fore they committed to moving forward regulations for 502, I was far more sold on specifically in Bellevue, a city most locals with the business license in December it. It just seemed like an easy roadmap to would associate with upscale shopping 2013. follow, to figure out how to run a store.” centers. By that time, McAboy had finished his The atmosphere created by the couple Once the couple landed their ideal loca- construction project management program at The Novel Tree feels akin to an Alpine tion, they agreed they wanted a discreet, at the University of Washington and Char- lodge, with paintings and bookshelves subtle tone for the store’s name, which led neski was ready to move out of the hospi- suspended by wire in front of pine-board- them to The Novel Tree. tality industry. ed walls and flooring. The cabin aesthetic “Something screaming, ‘Mr. Dizzy- “It was time for something new for both is adorns each of the walls and is only cut dank’s Emporium,’ wasn’t that suitable for of us,” Charneski said. “Between the two away by small modern touches like a streak this area,” Charneski laughed. “We wanted of us, we have the skill sets to run a retail of back-lit green window panes and bou- to make it appropriate to our market.”

www.marijuanaventure.com | 11 BUSINESS PROFILES

Above: Grower Randy Haugland tends to Zoots the plants in one of Db3’s grow rooms. Three brothers created one of the premier edible lines Inset: Tyler Wright, Chris Gregory and KaoSio Saeteurn display the first batch of By Patrick Wagner ZootBites Brownies. SEATTLE — There’s a reason why formed Zoots’ parent company, Db³, over Zoots products can be found behind the the course of Thanksgiving dinner 2012. Company: Zoots (Db3) counters of almost every state-licensed “It was exciting,” Patrick said. “Both recreational marijuana retailer. Actually, Dan and I have extensive business devel- City: Seattle, Washington there are three reasons: Dan, Michael and opment experience. We have a lot of expe- Employees: 28 Patrick Devlin. Together the three Devlin rience knowing how organizations come Most popular products: ZootRocks brothers put a lifetime worth of business together and with Mike’s technical knowl- Size: Tier 2 experience into creating Db³, Washing- edge, we formed a company.” Grow method: Indoor, hydroponic ton’s most prolific edibles producer and Dan, being the oldest of the three broth- processor. ers, was on the verge of retirement before It started with Michael Devlin, who had he was convinced by his two younger sib- Washington. Their products, ZootRocks, more than 30 years of experience with lings to help start Db³. ZootDrops and ZootBlast were made food manufacturing for giants like Oberto, “Dan is an entrepreneur,” Patrick said. available to consumers on Oct. 10, 2013. Sahale Snacks and Frito Lay. When Ini- “He started out with K2 Skis, then start- Today, the company is found in 55 tiative 502 passed, Michael immediately ed a series of businesses and worked with stores across Washington and aims to be saw the similarities between producing those. Dan has an MBA from Harvard, so on shelves of 70 stores by the end of Feb- high-end snack goods and cannabis-in- he brings a lot of business development ruary. fused edibles. Together with his brother knowledge.” “We just want to have Zoots available in Patrick, who was the director of operations In spite of numerous delays and chang- every store,” he said. “One of our commit- at a marketing and research firm, and his ing requirements from the Washington ments to retailers is that once we go into a oldest brother Dan, who had overseen a State Liquor Control Board, Db³ was li- store, then they would never run out. We series of small businesses openings, they censed as the first edibles processor in would always support them.”

12 | Marijuana Venture // February 2015

Untitled-1 1 1/20/2015 2:28:11 PM INNOVATION SINCE

1998

COMMERCIAL EDITION

office toll free PRODUCT SPOTLIGHT

Ful-Power Ful-Power, a product of Faust BioAg, is a special microbial iso- late from humic acids. It was developed by Robert Faust on the Big Island of Hawaii more than a decade ago. It became so popular in Oregon for grapes and cannabis that he moved to Oregon to increase pro- duction. Ful- Power is now used many by top growers from coast to coast and is also exported to New Zealand and The Nether- lands. Ful-Power contains fulvic acid, which increases genetic potential of the plants, Faust said. Ful-Power has no effect on pH of the solution. The term fulvic acid defines the low molecular weight fraction of humic acids. This is the fraction with the -bi ological activity that can pass through the cell walls and stimu- late cellular processes such as ATP, cell division and photosyn- thesis, Faust said. Faust has beenworking with humic substances for more than 40 years and is a member of the International Humic Substanc- es Society and is an agricultural consultant and pest manage- ment advisor. “It is the living/organic link between living plant roots/cells and dead minerals,” Faust said. “Inorganic mineral salts are used in most hydroponic and conventional farming. The end result is quicker germination, faster growth, higher-quality pro- duction and yield, along with some disease resistance.” www.bioag.com

Gnatty Nets Looking for an all-natural method for pest control? Gnatty Nets could potentially offer a solution. Gnatty Nets bags fit over cylindrical plant containers with the goal of reducing the need for chemical pesticides. The breathable bags are designed to allow water in while being im- penetrable by soil-bourne bugs. Not only does this keep unwanted in- sects out, but also prevents infestations from spreading if a bug does infiltrate your soil. The nets are made of reusable, machine washable nylon and feature a cinch for growers to secure openings. The bags come in four sizes, ranging from small, one-gallon nets to extra-large nets that are capa- ble of fitting 15-gallon containers. www.gnattynets.com

16 | Marijuana Venture // February 2015

PRODUCT SPOTLIGHT

The Recipe Sliderule a lab that does chromatography, the test results are used to determine how many The Recipe Sliderule is a tool from LeB- doses are in a given batch of cannabis. lanc CNE for those making medibles, tinc- The Recipe Sliderule helps produce con- tures, concentrates and other products sistent and predictable results from batch that applies lab analysis to dosages and to batch even when different cannabis is serving sizes. batch of cannabis or the composition of used. The tool can be downloaded as an Ex- a mixture of two samples of cannabis. The Recipe Sliderule is open source soft- cel spreadsheet or online as a Google Those who are making edibles can use the ware released under a creative commons Sheet at www.LeBlancCNE.com/reci- spreadsheet to help ensure their products license. It’s free to use and distribute as pe-sliderule/. have the desired amount of THC or CBD. long as it’s kept intact and unaltered. It calculates how many servings are in a After a batch of cannabis is analyzed at www.LeBlancCNE.com

WeedWeb With nearly half the United States now allowing medical mari- juana, and with four states that have already legalized recreational use, new canna-businesses are popping up all across the country. Because it’s a new, emerging market in a controversial space, many operators are unsure of where to get basic services and sup- plies. WeedWeb is a resource to help connect entrepreneurs with WeedSkunk the services they need. WeedSkunk is a new online mapping tool that integrates several “People are just going out there without a map into this unchart- different aspects of the cannabis industry. ed territory,” said WeedWeb founder and developer MK Tantum. In addition to finding medical and recreational cannabis retail- She launched the company in February 2014 and has been ers, the website also allows users to search for grow shops, head steadily adding to the number of businesses featured on the site. shops, smoking lounges and doctors willing to give authorizations The website targets business owners and operators, who can man- for medical cards. age their own profiles and feature their products, in addition to Customers can rate different businesses and provide feedback browsing other support companies. on individual products, helping business owners understand which Tantum, who says she has a passion for entreneurship, has a products have been successful. WeedSkunk’s notification system background in the health care field, where she previously designed alerts users to new products, location ratings and comments, -al websites and software applications for hospitals and other phar- lowing for immediate response time to customer feedback. maceutical companies. Each virtual storefront offers a full menu page with unlimited She said she wants WeedWeb to be a comprehensive resource postings of products, deals, events, announcements and photos, for businesses, whether they’re looking for packaging, security, as well as an unlimited job listings interface, letting potential em- hardware, legal help or hiring new employees. ployers reach out to experienced individuals in the marijuana com- Companies can open their online profile for free. Getting started munity. is is as simple as uploading some basic information about the com- WeedSkunk is also planning to release a mobile app soon to al- pany, as well as logos and profile pictures. low for more mobile mapping. www.weedweb.com www.weedskunk.com

18 | Marijuana Venture // February 2015

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Cedar Creek Cannabis understands the importance of quality. We take our commitment to excellence very seriously and strive to produce only the highest quality cannabis flower, extracts and oils available.

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If you have sugar leaf trim and/or flower to sell, send your inquiry including any applicable test results and pricing to: [email protected] or give us a call at (360) 513-9691. Tim Cullen, co-owner of Colorado Harvest Company, Evergreen Apothecary and O.pen VAPE. “I THINK THE WHOLE WORLD IS WATCHING HOW LEGALIZATION UNFOLDS IN COLORADO OVER A LONGER PERIOD OF GESTATION. WHEN COLORADO PASSED THE LEGISLATION, IT CAUGHT ATTENTION OF NOT ONLY THE NATION, BUT REALLY AROUND THE WORLD.

From Teacher to Tycoon Tim Cullen aims to change marijuana’s future by avoiding the mistakes of the past By Patrick Wagner im Cullen has heard every Breaking think I can probably grow these plants as start into this.” TBad joke you could throw at him. In well as anyone else does,” he said. “So I It didn’t take long before Colorado Har- reality, the former-teacher-turned-marijua- picked up some plants and started.” vest Club (CHC) was blooming and the na-mogul shares very little with TV’s Wal- It started very small, with Cullen exper- Mile High City was moving headlong to- ter White, the fictional chemistry teacher imenting with what would work best for ward legalization. who became a criminal kingpin. growing cannabis, looking to find the best “I think the whole world is watching Cullen and business partner Ralph Mor- combinations and variables. how legalization unfolds in Colorado over gan own and operate both Colorado Har- “At that point we could produce plants a longer period of gestation,” Cullen said. vest Company and Evergreen Apothecary at my house, which, in hindsight, was a “When Colorado passed the legislation, in Denver. really cool laboratory,” he said, sounding it caught attention of not only the nation, “I was a high school biology teacher for very much like the person who had taught but really around the world. We get a fair 10 years prior to jumping into this,” Cul- photosynthesis and other concepts to teen- number of media inquiries from outside len said. “You can insert your Breaking agers in a former life. “I was able to play the U.S.” Bad joke now.” with soil and hydroponics and different The implementation of Amendment 64, It was nearly a decade after leaving his lighting and cooling and nutrient solu- which began in 2012, also brought verti- teaching position that Cullen began Col- tions. Over the course of a few years we cal integration, and the initial requirement orado Harvest Company in 2009, but his got really good at it.” that business owners produce 70% of their first contact with medical marijuana came Those early years of experimentation own product as a regulatory device. That in 2002, when his father was diagnosed worked in his favor as he ventured into was the impetus that led Cullen to team up with Crohn’s disease. Cannabis-infused the business side of the medical marijuana with Ralph Morgan. edibles helped with his flare-ups, Cullen world, and eventually into the legal, retail “He and I really came together out of said. Shortly thereafter, Cullen received market. necessity, a couple puzzle pieces that real- more bad news, prompting him to take “It wasn’t like in 2009 I was jumping ly fit together well,” Cullen said. “He had matters into his own hands when he was into the deep end of the pool,” Cullen said. a really successful retail store, Evergreen also diagnosed with Crohn’s disease. “I knew how to do it. That gave me the Apothecary, and an undersized grow. I had Eventually, he had the idea, “Hey, I confidence to lease a warehouse and really >> CONTINUED ON PAGE 24

www.marijuanaventure.com | 23 Savings of a National Distributor Gardener-to-Gardener Service

<< CONTINUED FROM PAGE 23 sponsibility guides the company’s actions. a great big grow and a really small retail One example is a recently-published study Gavita Pro Line e-series center that wasn’t really even open.” on the economic impact of CHC and Ever- Gavita Pro 1000 DE The merger went on to become a ded- green Apothecary. icated partnership between Morgan and Cullen worked with Jack Strauss, Ph.D., Cullen even after the 70% requirements on the study, which showed the two mari- for vertical integration had sunset. juana businesses impacted 280 jobs in the “We were peers in the space and saw the area and has contributed nearly $30 mil- benefits for each of us,” Cullen said. “As it lion in revenue. would turn out, we get along fantastically, “I want people to know that there are we make good decisions together and real- jobs being created, that they are getting ly enjoy working together. So what started tax dollars from this revenue, that their off as somewhat a shotgun marriage has vote wasn’t in vain,” Cullen said. “We’ve turned into a fantastic business relation- always felt like we’ve had a lot of eco- ship.” nomic impact but we could never really After forming the business partnership, say what that was. It was cool to work Morgan split his ownership of both Or- through Dr. Jack Strauss on that project ganaLabs and O.pen VAPE with Cullen. and really see what the impact was. And it Morgan and his wife had originally found- was substantial.” ed OrganaLabs in 2010. Strauss was the main researcher assem- “When Ralph and I became partners bling the data. In his report, he wrote that in 2011, I purchased his wife’s stock, so his goal was to focus on the economics he and I became 50-50 partners in that and to present the benefits of the cannabis company,” Cullen said. “What we ended industry to city and state officials in terms up working out is they purchased half of of tax revenue, jobs created and payroll. that company and then we launched O.pen “As a result, I found that CHC and EA VAPE. So the O.pen Vape is the device pay 10 times the tax revenue of both a typ- and the oil inside of it is made by Orga- ical restaurant and retail store,” Strauss naLabs.” wrote in his report. Today, CHC and Evergreen Apothecary Cullen compared his businesses to the have 47 employees, and plans are in place Happiest Place on Earth. for two additional stores to open in 2015. “We’re sort of like Disney World. For Over 20 Brands! One grow was just licensed, and construc- every Mickey Mouse you run into there Contact Rob Howland tion for another is under way and should are five people behind the scenes making be up and running within the next four that happen,” he said. “We have 55,000 (303) 427-2379 months or so. square feet of warehouse space under [email protected] “So by this time next year I’ll have light and so the majority of my employees between 90 and 100 employees,” Cullen are in the background making magic and tgsdist.com said. then the people in the retail stores sell that Cullen believes a sense of social re- magic.”

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28 | Marijuana Venture // February 2015 WASHINGTON’S LEGAL MARIJUANA IS BEING TAXED TO

DEATHBY GARRETT RUDOLPH

ashington State faces a critical juncture in its process of legalizing marijua- na. The millions of dollars that have exchanged hands since July 2014 tell one story, but those that are operating businesses under the regulation of WInitiative 502 tell another story altogether. In the first six months of Washington’s retail market being open, more than $60 mil- lion worth of legal marijuana was sold throughout the supply chain, with more than $40 million of that at the retail level. Eighty-eight retail stores reported sales to the Washington State Liquor Control Board during that initial six-month stretch, with the average month of sales equaling more than $130,000. Although consumers largely griped about the high prices in compari- son to medical or the black market, a casual glance at the industry would have showed positive signs of growth. But steadily rising sales each month at the retail level covered up the uneasy facts: For the most part, nobody was making any money. In July, most retail stores couldn’t stay open for supply and demand. And not all start-up business- more than a few days at a time because they didn’t es are expected to survive year one in any industry, have enough marijuana to stock their shelves. But let alone one as nascent as legal marijuana. by November, when the majority of outdoor grow- But Washington’s problems seem far deeper ers began harvesting their crops, the market was than growers growing too much. all of a sudden flooded with product. Currently, all roads of evil lead back to taxes. Demand could not keep up with the supply. “They’re the biggest burden for sure,” said Suzy Wholesale cannabis prices went through a Wilson, of W.O.W. Weed, a licensed Tier 2 grower steep drop-off, and many licensed producers and in Klickitat County. processors were left holding a lot of product they “We wouldn’t have a glut of product out there couldn’t unload. Many growers wonder openly if if it could be sold at a reasonable price,” she said. they will be able to survive the lean stretch. Wilson said W.O.W. Weed is one of the few Tier Some seasonal fluctuation is to be expected with >> CONTINUED ON PAGE 30

www.marijuanaventure.com | 29 << CONTINUED FROM PAGE 29 indoor and out- ferent stages of the 2’s she knows of that is selling its product door cultivation and I GET WEEKLY CALLS supply chain. Then pretty consistently. She said she’s typically Klickitat County has all marijuana busi- been getting $5-6 a gram, but knows some some of the lowest FROM GROWERS nesses face the wrath sellers that have had to settle for just a cou- electricity rates in WHO ARE AT THE of Internal Revenue ple dollars a gram, or can’t sell their prod- the nation. Code 280E, which uct at all. But come next CRUX OF LOSING prevents the vast “I get calls weekly from growers who are November, when majority of deduc- at the crux of losing everything they have,” even more outdoor EVERYTHING tions that regular she said. “They did not anticipate that they growers are licensed businesses can uti- would not be able to sell their product. and the supply of THEY HAVE. lize on federal tax There’s a lot of good product out there, but product could sur- returns. it’s not being purchased by the average user pass 100 tons, what will happen then? “It’s hard to really speak to whether the and that’s directly tied to the taxation.” “In November, I don’t know. I can’t look actual tax level is too high,” said Todd Ar- Studies in previous years seem to sup- that far right now,” she said. “I’m dealing kley, CPA, of Arkley Accounting Group, port Wilson’s theory. In 2012, the Wash- with three or four other Tier 2’s right now which handles taxes for a number of mar- ington Office of Financial Management that are faced with losing their homes ijuana business clients. A variety of factors estimated Washington users consumed because they mortgaged their homes to have to be considered in order to answer about 85 metric tons of marijuana. A year do this. They have good product to sell whether 25% is too high, too low or just later, the RAND Corporation estimated but they can’t find a market. We’ve put so right, Arkley said. that number was closer to 175 metric tons. much work into this, all of us. We’ve slept, However, the one thing he can say defin- In 2014, Colorado estimated its appetite eaten and breathed it since we made our itively is that the structure is not set up to to be about 135 metric tons. applications (in November 2013).” be business friendly. With about 300 licensed producers ac- Washington’s steep excise taxes are one “The way it’s structured right now, as an tive currently in Washington, there’s no factor, but it’s also the structure of the tax- excise tax and as a tax on the business, is way the state’s voracious need is being es that compound problems for marijuana that you cannot deduct that tax expense on over-supplied through I-502 businesses. businesses. your federal return,” he said. Wilson is set up in a good position to Currently, Washington State takes a 25% “I couldn’t say with any authority, is be successful. Her farm is set up for both excise tax bite out of potentially three dif- >> CONTINUED ON PAGE 32

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Bulk loads shipped weekly throughout Washington, Oregon and Colorado 970-281-7907 MillerSoilsLLC.com [email protected] << CONTINUED FROM PAGE 39 non-deductible item on a federal return,” this tax too high or too low, but I could Arkley said. “I’d actually be surprised if JUST CHANGING definitely say the way it’s structured is the they didn’t change it. They could change it least beneficial way possible, and adds that and maybe still make the same amount of THE EXCISE TAX TO much more expense to all these compa- money.” A SALES TAX, EVEN nies.” However, tough decisions still remain One issue that will be addressed in the for the Legislature, which has the McLeary IF YOU RAISED IT, Washington’s 2015 legislative session is Decision and mandate to sufficiently fund whether to change the excise tax to a sales public education hanging over every tax WOULD HELP tax. That switch might make Washington’s decision over the next several months. tax structure more similar to Colorado, “Just changing the excise tax to a sales EVERYONE’S which places a 15% excise tax on cultiva- tax, even if you raised it, would still help tors and a 10% special sales tax on retailers. everyone’s bottom line,” Arkley said. BOTTOM LINE. Wilson referred to herself as a “bleeding tail stores, or be willing to pay the higher heart liberal,” who is “always happy to pay MORE NUMBERS TO CONSIDER prices for an occasional thrill — consume taxes,” but the current structure unfairly Tax rates aren’t the only factors that one-tenth of the cannabis. taxes marijuana businesses in a way no need to be analyzed when looking at the Think about what those percentages other industry has to contend with. economic strength of legal marijuana. mean. Tax reform is also one of the key targets Two statistics out of Colorado bring to In essence, retailers are trying to survive of the “2015 Cannabis Project.” light a question of whether or not Wash- knowing 90 percent of their potential cus- “If marijuana were taxed similarly to ington’s legal marijuana market is set up in tomers will never set foot in their store. (how) alcohol and tobacco is now nation- a way it can legitimately thrive. Mark Kleiman, a legalization consultant ally, we can help generate billions annually According to an August 2014 story by for the state of Washington, cited similar in tax revenues and savings to state and the New York Times, a report prepared statistics in a September 2013 story in the federal expenditures on enforcement,” said for the Colorado Department of Revenue Seattle Times. Kleiman said 80% of mari- Pete O’Neil, managing member of C&C indicated that almost 90% of marijuana juana is consumed by 20% of the users. Cannabis Company. products are consumed by 30% of the con- Another statistic indicates that legal “My feeling now is that the Legisla- sumers. Therefore, the 70% of casual users weed is more of a tourist attraction than it ture didn’t intend this (excise) tax to be a — those most likely to shop at licensed re- is a facet of locals’ lives.

32 | Marijuana Venture // February 2015 the same heavy saturation of out-of-state shoppers. After all, with Canada to the north and Oregon to the south, most of Washington’s neighbors likely have better sources for pot than local residents do. Meanwhile, Colo- rado is surrounded by a half-dozen states that either staunchly oppose cannabis, or certainly aren’t known for producing qual- ity bud. But, again, the numbers indicate the state might not be well-positioned to capi- talize on tourists. Public consumption is banned in Wash- ington. So are smoking lounges, where people might be able to gather for games of pool or to watch a sporting event while en- joying a locally-sourced joint. Hotel rooms also frown upon lighting up indoors. Essentially the only place out-of-state tourists are allowed to smoke marijuana is in the privacy of somebody’s home. Those factors might not matter, though, In December 2014, the Denver Post around the world. if something isn’t done in the near future reported that tourists account for 90% However, even in metro areas, visitors about the tax rate and structure. of marijuana sales in mountain towns. A account for more than 40% of marijuana Every month of the next year could be high percentage is probably to be expect- sales, the Denver Business Journal report- critical to the success or complicit in the ed, considering the world-class ski resorts ed in July 2014. failure of Washington’s legal marijuana of the Rocky Mountains draw visitors from Perhaps Washington won’t see quite market.

www.marijuanaventure.com | 33

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www.quicktrading.com (800) 635-8883 – Wholesale | Retail • At book sellers everywhere ByTommy. Garrett Rudolph ithout a doubt, Tommy Chong is one “I say, ‘Smart people are going to get Wof the most recognizable pot enthu- high.’” siasts on the planet, and it seems only a In his own way, he believes he’s already matter of time before his likeness adorns a solved some of the world’s great prob- chain of retail stores or commercial line of lems: Gun violence can be solved by in- pre-rolled joints. surance; the droughts in California need a While Chong may very well become the water pipeline; hemp can save the forests first living celebrity to cash in big through and reduce landslides. He came up with marijuana branding, it’s evident that he’s those ideas just from sitting back, smok- more than just a prod- uct pitchman. Chong is a believer in the power and importance of cannabis. “It’s a magical “It’s a magical plant. It’s plant,” he told a group of media members and industry profes- going to save the world.” sionals at the C&C Cannabis Company’s headquarters in early January. “It’s going ing a joint and letting his mind wander, he to save the world. It’s going to take over said. the world and save the world, and I’m just “And I’m just a pothead comedian,” he very happy to be a spokesman for it.” said. Chong credits a cannabis oil regimen Chong owes his life and much of his ca- for helping him overcome prostate cancer, reer to marijuana. and is an outspoken proponent of medical “Everything has always been pot-relat- marijuana. ed,” he said. “That is one thing that con- “When I heard they were thinking about nected me to everyone, either positively getting rid of the medical side and just go- or sometimes negatively. ... I’ve gotten ing with recreational, I thought, ‘Who are stoned with some of the greatest people on these dumbf*cks?’ I mean, how f*cking this planet.” stupid is that?” he said. Chong offered some simple advice to Yet, it’s not just the medicine for the people in the cannabis industry. body that he supports. “If you come across an adversary, don’t “Pot is medicine for the brain,” he said. argue with them,” he said. “Listen to what He tells people that marijuana is going they have to say. My advice is to listen, to save the world, and they ask him how. listen, listen. Don’t argue. Listen.”

36 | Marijuana Venture // February 2015 “It’s a magical plant. It’s going to save the world.”

www.marijuanaventure.com | 37 Brothers Giono and James Barrett are the men in charge of Rainforest Farms, which they hope will eventually be a state-licensed grow facility. THE NEXT FRONTIER November election was just the beginning for legalized marijuana in Alaska By Garrett Rudolph

he new industry of legalized mari- lage creates a unique challenge for the margin of 52% in favor, 48% against. Tjuana in Alaska is already creating structuring and operation of the canna- It was the narrowest margin for any of a palpable excitement for the future of bis industry. the four states that have now enacted The Last Frontier. It’s probably one of the most misun- legislation to end marijuana prohibi- By sheer land mass alone, Alaskans derstood states in the nation, small in tion. That narrow margin of victory face challenges no other state can fath- population, but rich in natural resourc- means nothing is going to come easy om. More than 600,000 square miles es and separated by more than 2,000 for Alaskans; the battle is far from are rippled with titanic mountain rang- miles from the U.S. mainland. For bet- over. It’s creating a buzz of conflict es and a varied terrain of dense forest, ter or worse, most Americans associate among cannabis opponents and sup- marshlands, tundra, glacial ice and the 49th state with reality television, porters, but there’s an unmistakable more than 3 million lakes. The Ber- snow and Sarah Palin. They read about sense of hope and optimism among the ing Sea wraps its arms around 34,000 Seward’s Folly in grade school history entrepreneurial dreamers who want to miles of jagged coastline, and hun- books, but many have never seen its launch business ventures. dreds of islands are jostled like buoys breathtaking beauty. in the surf. Ballot Measure 2 — the state’s third EMERGENCE OF AN INDUSTRY Every island, every borough inac- attempt at legalizing marijuana — was Entrepreneurs are wasting no time cessible by road, every snowed-in vil- approved by voters in November by a in establishing business plans, starting >> CONTINUED ON PAGE 40

www.marijuanaventure.com | 39 << CONTINUED FROM PAGE 39 ancillary companies and being proactive in lobbying for favorable regulations. “In terms of the people that are interest- ed, there are a bunch of folks that want to take part in a wide range of avenues: tour- ism, education, dispensaries, clubs, grow facilities,” said Cory Wray, director of the Alaska Cannabis Institute and one of the organizers of the Alaska Cannabis Classic trade show scheduled for Anchorage. Wray said it’s a nerve-wracking, frus- trating and exciting time in Alaska all at once. “Right now I think there’s more excite- ment because their imaginations can run wild,” he said. Many people are taking the practical, A traditional Alaskan farm by-the-book route, biding their time and stretches across the Matunaska focusing on sound policy before getting in Valley. Photo courtesy the U.S. too deep. Others are diving headlong into Department of Agriculture. commerce with a devil-may-care attitude, almost daring police agencies to uphold while this transition from Prohibition Some say these business ventures un- the law. takes place, but look forward to being le- dermine the process, or give opponents Discreet Deliveries in Wasilla acknowl- gal soon,” the Discreet Deliveries website ammo for potential bans and moratoriums. edges it’s jumping the gun by offering says. The website also says the business Others just see them as manifestations of straight-to-your-home marijuana deliver- plans on paying all applicable taxes and Alaska’s fiercely independent spirit. ies. following state rules and regulations once For decades, Alaska has already main- “Technically we are acting rouge (sic) implemented. >> CONTINUED ON PAGE 42 DON’T BE A DOPE! Advertise with Marijuana Venture Email [email protected] for more information

40 | Marijuana Venture // February 2015

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<< CONTINUED FROM PAGE 40 NASA’s view from space of tained some of the most lenient marijuana Alaska’s Pavlov volcano. laws in the country. The transition to le- galized, regulated cannabis might not be as drastic in Alaska as it is in other states. “A lot of folks in Alaska are do-it-your- self folks,” Wray said. “They might al- ready have a piece of property that they own that they can turn and build a green- house. Or land where they’re already do- ing farming, and they can turn that over to cannabis. “To be honest, I think the people that say it’s going to be super-expensive and there’s going to be all this red tape are lawyers. I think the people in Alaska will be able to bring skills to the table that other business people in other states might not be able to bring to the table. It’s the do-it-yourself nature Alaskans have. They’ve already been growing marijuana for a long, long time.” that provides support to women in the can- the need on a fact-finding tour of -Colo WOMEN GROW nabis industry. Women Grow has chapters rado dispensaries, where she noticed the Alaska has the highest ratio of men to in more than a dozen cities across the U.S. industry was largely dominated by men. women in the entire nation. Perhaps that’s Kim Kole started the Anchorage chapter She said there were several times that she all the more reason for local chapters of following her key role with the successful was the only woman in a waiting room of Women Grow, a networking organization “Yes on 2” campaign. She began to see >> CONTINUED ON PAGE 44

42 | Marijuana Venture // February 2015 We have over 20 i-502 surveillance systems approved and operating! << CONTINUED FROM PAGE 42 more than a dozen men. It didn’t create a sense of comfort, she said. Her own plans in the industry are to “have a medical dispensary, but I am cer- tainly not turning away any recreational users,” she said. “And I want to make sure my dispensary is comfortable for wom- en.” Later, when she attended an Alaska Cannabis Institute event in October, she said she was impressed that there were a fair number of women in attendance. “But I was saddened to hear some of them say they were overwhelmed and thought about leaving.” Stay; get the information; remember ev- erybody starts at square one, she told the women she met. James Barrett of Rainforest Farms works to set up a grow room. That was what she called the “second nail in the coffin” of Alaska needing an organization where women could network licensing process begins. mistakes of Washington and Colorado can and support each other. “I am confident that Women Grow work to the advantage of Alaska. “I like the idea of encouraging women will prove to be a very powerful entity “They’re making some mistakes we can in the cannabis industry,” she said. in Alaska, helping to create a functional, learn from, but they’re also enjoying some Dollynda Phelps followed suit and profitable role for women in our state’s successes we can tap into and learn from. chaired the Kenai Peninsula chapter. cannabis industry by promoting active ... Getting that easy point across to our as- Phelps said she and her husband intend participation,” she said. sembly members is another story. They’re on starting a cultivation facility once the She added that being able to use the >> CONTINUED ON PAGE 46

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Q: Will individual communities be able to opt out of marijuana manufacture and sales? Buds cure in jars in this pho- A: Yes. AS 17.38 provides for local option elections to from Rainforest Farms. that permit a community in Alaska to opt out of manufacture and sales of marijuana. Commu- nities will continue to be bound by authority -re << CONTINUED FROM PAGE 44 ernment owns nearly 70% of the land in garding individual constitutional privacy rights as set forth by the Supreme Court in Ravin v. Alaska. a little more hesistant to see the black and Alaska, therefore limiting the places that white writing on the wall.” will be eligible for marijuana production Q: Who is writing the regulations for marijuana facilities. manufacture and sales? RAINFOREST FARMS Despite the potential earnings, James A: The Alcoholic Beverage Control Board has been Brothers James and Giono Barrett are said he recognizes that just getting li- tasked with drafting the regulations relating to doing the legwork for what could even- censed for a cannabis business is not a the manufacture and sale of marijuana products. Alternatively, AS 17.38.080 authorizes the legisla- tually become one of the top production golden ticket. ture to create a separate Marijuana Control Board operations in Alaska. “The glamor’s kind of washing away to assume the power, duties and responsibility. With Giono as the master grower and now and it’s about getting down to brass James working to establish contacts and tacks and running the numbers,” he said. Q: Who will administer the licenses and enforce regulatory restrictions on the licenses? liaison with different government agen- “Sure, there’s a lot of money here, but if cies, they are putting Rainforest Farms on we don’t get this margin of profit right, A: AS 17.38.900 defines the Alcoholic Beverage Control Board as responsible for adopting reg- the map early. Few other cannabis-relat- we’re going to flop.” ulations as outlined in AS 17.38.090 unless the ed businesses have been as up front about Legislature creates a separate Marijuana Control their plans as Rainforest. RAVEN WEED FARMS Board. “Our approach from the beginning was Financial risks are an inherent part of Q: Can I sell or buy marijuana legally starting to- to be public,” James Barrett said. any start-up business. day? Their first order of business is finding The Holdiman family is hoping a huge A: No. The act becomes effective 90 days after a warehouse-type location to house the risk will pay off with Raven Weed Farms. certification. Until that date, all current statutes grow operation. The Barretts are look- “Capital is actually the only hurdle we and regulations relating to marijuana are in full ing for a warehouse between 5,000 and face,” Patricia Holdiman said. force and effect. 20,000 square feet. While they plan on ex- She and her husband David are plan- Q: How much harvested marijuana does AS panding down the road, their initial plan is ning on selling their home and a car, cash- 17.38 allow an unlicensed person to possess in to start with a central location in Juneau. ing out their retirement funds, borrowing his or her home? That facility will act as a central hub for money from family and seeking investors A: Four ounces or less. AS 17.38.020 allows for the other facilities in outlying areas. in order to operate a cultivation facility in in-home production and possession of marijuana While most of Alaska is only suitable the Matanuska Valley. for personal use. The Alaska Court of Appeals in for indoor growing, James said there were They’ve already spent thousands of Noy v. State (2003) ruled that possession of mar- parts of Southeast Alaska, “which would dollars flying to Washington to meet with ijuana in an amount greater than four ounces is not personal use possession. Additionally, AS be absolutely perfect for greenhouses.” several growers, retailers and testing lab- 17.38.020 specifies it will be lawful to possess The trick is finding those areas that oratories, and it could cost them up to marijuana harvested from up to six plants (three not only have a suitable location, but are $60,000 just to run utilities to the property or fewer being mature, flowering plants) on the premises where the plants were grown. not in National Parks. The federal gov- >> CONTINUED ON PAGE 48 >> CONTINUED ON PAGE 48

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Please call 1.800.476.9715 for a free catalog or visit us online at www.GrowersSupply.com/ADMV. FANS << CONTINUED FROM PAGE 46 David’s career and hobbies have cen- << CONTINUED FROM PAGE 46 where they are thinking about setting up tered around automobiles. Q: What types of licenses will be available? their operation. And that’s not to mention “David has a gift for seeing systems and the lighting, cameras and growing equip- strategies and finding simple solutions to A: The types of licenses and process for ac- quiring them have yet to be determined. AS ment they’ll need. complex problems and that, along with 17.38 gives the state of Alaska nine months Part of the allure is the opportunity to his mechanical ingenuity, allows him to to develop regulations for licensing. get into the industry on the ground floor. be successful and rise to the top in any en- David Holdiman is a fourth-genera- deavor he sets his mind to,” Patricia said. Q: Is the Alcoholic Beverages Control Board keeping a list of individuals or businesses tion Alaskan whose ancestors worked on The Holdimans hope to be leaders in the interested in starting a marijuana business building the Alaskan Railroad in the early industry and to be able to provide a posi- that I can put my name on? 1900s. His uncle, Bill Stolt, was a pioneer tive contribution to their community. A: No. AS 17.38 gives the state of Alaska nine who became the mayor of Anchorage in “We have the chance to make a real dif- months to develop regulations for licensing 1941. ference in this world with this unique in- marijuana growers and sellers. These regu- “Pictures of David’s pioneering family dustry; we cannot let this opportunity pass lations must be written and codified before are on display at the Anchorage Museum, individuals or businesses may apply for li- us by when there are so many who can be censes. The board will start accepting appli- so it is only natural for us to carry on the helped,” Patricia said. cations by Feb. 24, 2016 and will act on them family tradition of being pioneers in un- within 90 days of receipt of application. charted territory like the Green Rush that BATTLE OF THE BANS is the legal marijuana movement,” Patri- Q: As of the effective date of Feb. 24, 2015, Just as in Washington and Colorado, will it be legal for people to engage in de- cia said. “What makes it even more excit- much of the early focus of legalization livery, manufacture, cultivation and test- ing for us is that big business has not yet is going to be on which cities, towns ing as described in marijuana initiative AS gotten involved so there is still a chance and boroughs will elect to ban marijua- 17.38.020? for anybody to make a go of it. Wheth- na businesses. Many municipalities, like A: No. Persons who are not licensed to en- er you are rich or poor, we are all on the Anchorage and Juneau, are already taking gage in delivery, manufacture and testing same playing field just like the gold min- will continue to be subject to prosecution antagonistic stances against the cannabis for AS 11.71 criminal statue offenses. It is an- ers when they came to Alaska during the industry. ticipated that licenses will be issued by May Gold Rush, and we all have a chance to be Ballot Measure 2 specifically provides 2016 per the timeline described in AS 17.38. successful if we are willing to put in the the option for municipalities to opt out, As of the effective date, personal use as de- hard work.” but proponents believe that could threaten scribed in AS 17.38.020 will be legal. But the challenges ahead aren’t just the success of the entire system. There’s financial. The Holidmans recognize that simply too much land for residents to be Time Frame over-regulation could cripple the entire able to have safe, reliable access to legal Nov. 4, 2014 industry even before it launches. Any cannabis if more than a handful of cities Statewide election held. Ballot Measure 2 passes 53% to 47%. regulations that would handicap the li- take advantage of the opt-out clause. censed growers and make them unable “While talking with an assembly mem- Nov. 24, 2014 Vote certified by Division of Elections. to compete with the black market could ber in Wasilla it was noted that here in the Statutes will be enacted by operation of law spell trouble for Alaska’s fledgling indus- rural parts of Alaska there are concerns 90 days later. try. It was a common theme they heard about the fact that they just do not have Jan. 20, 2015 when visiting state-licensed growers in the personnel to enforce the regulations or Legislature gavels in. Multiple bills related to Washington: excessive taxes, strict testing the testing facilities to test the final prod- the marijuana industry are anticipated. requirements and high levels of security uct, let alone the people to help draft rec- February 24, 2015 hamper success. ommended legislation,” Patricia Holdi- Statutes are enacted. The nine-month dead- “The politicians do not understand the man said. line for developing regulations begins. industry,” Patricia said. “They think it is “The question they are facing at this Nov. 24, 2015 nothing more than young adult criminals point is how can they create a thriving at- Deadline for the board to adopt regula- trying to expand questionable behavior tions. If regulations are not adopted by this mosphere for a burgeoning industry, yet date, local governments have the option on law-abiding citizens. We need to show keep it regulated and safe when they don’t of establishing their own regulations. Final them that they are wrong and that there is even have a police department, testing fa- regulations package submitted to the Gov- nothing to be afraid of.” cilities or facility inspectors?” ernor’s Office and Department of Law for The Holdimans bring a great deal of Holdiman acknowledges there will con- review and approval. Alaskan independence into the cannabis tinue to be a great deal of resistance from Feb. 24, 2016 industry. the local government, but that resistance Board must start accepting applications and must act on them within 90 days of receipt. Patricia comes from a long line of farm- will only feed the black market. If the board has not adopted regulations, ers, spending many a childhood summer “We need to show them that this is a applications may be submitted directly to planting fruits and vegetables and tending positive change for Alaska and will create local regulatory authorities. crops in her family’s gardens. the needed revenue to fund our schools, May 24, 2016 She has spent 20 years working in re- fire departments and many more needed Initial marijuana industry licenses expected tail, and she has a down-home, folksy na- services,” she said. to be awarded. ture that helps her relate to customers. >> CONTINUED ON PAGE 50 Source: Alaska Alcoholic Beverage Control Board

48 | Marijuana Venture // February 2015

<< CONTINUED FROM PAGE 48 they also need to be educated on policy process. Kole said the time frame she’s Alaska is also unique in its relationship and the rule-making process, and recom- expecting is sometime between August to the federal government, which still mends people connect with the Coalition and November of 2016 that businesses maintains that marijuana is a Schedule I for Responsible Cannabis Legislation. would be licensed and operational. controlled substance. The federal gov- “Right now, the focus is just on making “The conservative culture has a strong ernment owns nearly 70% of the land in sure that everything goes how we want base here in Alaska and it will be a chal- Alaska — far more than any other state in it to, to make sure we don’t end up like lenge to help them see all the positive the nation — setting up an interesting co- Washington,” she said. “It could be done aspects that can and will come from wel- nundrum about the extent of where state better, and we would like to do it better.” coming this newly legalized industry to law holds power and whether or not the She said Washington’s exorbitantly the Alaskan Frontier,” Holdiman said. feds would withhold funding due to the high tax rate defeats the whole purpose Phelps said one of her focuses is on get- acceptance of marijuana. of legalization and only allows the black ting government to recognize that there Wray pointed to Washington and Colo- market to thrive. As a hopeful dispensa- are three potential benefits of allowing rado as indications that Alaska is probably ry owner herself, she said she also prefers regulated marijuana: revenue, medical safe. Colorado’s vertically integrated system. benefits and being able to more effectively “Colorado and Washington aren’t losing Those are among the laundry list of keep it out of the hands of young people. funding through these federal programs,” questions entrepreneurs are anxious to “For me, I want to see some regula- he said. “Why make the assumption that have answered. Will Alaska allow verti- tions written that are functional and fair,” Alaska would lose funding if they endorse cal integration? What kind of licenses will Phelps said. “We see what’s going on in local marijuana laws?” be granted? Will delivery services exist? Washington and how their over-taxation is Regardless of successes other states What about smoking lounges? Canna- in essence killing the market.” have had, Kole said there are still plenty bis-friendly lodges and hotels? How will James Barrett said he believes Alaskans of roadblocks and obstacles in the way. Alaska’s tourism industry be allowed to will be weary of any sort of lottery for li- “I’m encouraging people to make sure dovetail with cannabis industry? Will in- censes. they get political, educated, involved and dustrial hemp be addressed? They’re very concerned about their per- active,” she said. Alaska can follow the lead of Wash- sonal freedoms and rights, he said. She said it’s important for prospective ington and Colorado, while learning from “I personally believe the closer we stick business owners to be educated about their mistakes, Kole said. to our state constitution, the better off more than how to run a business. She said It’s not likely to be a quick and painless we’ll be.”

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50 | Marijuana Venture // February 2015

LEGAL PAGES LEGALIZATION IN Unique challenges await ALASKA IS INDEED Alaska in the coming year A ONCE-IN-A- Election results are just the beginning for industry hopefuls LIFETIME By Ben Adams OPPORTUNITY. n Nov. 4, 2014, to grow cannabis, the entire industry will OAlaskans voted be brand new in 2016 when the first licens- to legalize recreational es will be granted. ka. While federal presence (outside of the marijuana. However, However, despite the opportunities, the military) is not particularly overwhelming many unique challeng- largest problem facing those who wish to in Alaska, federal prohibition does remain es lie ahead for those help create the industry in Alaska is uncer- a significant factor for those who wish to wishing to take advan- tainty. This uncertainty manifests itself in create canna-business in Alaska. tage of the opportunity. several ways. The next potentially problematic issue Make no mistake about it: Legalization in While the overall trend in the country is is that the rules and regulations that will Alaska is indeed a once-in-a-lifetime op- positive regarding federal intervention, it govern the industry have not been written portunity, because unlike the other states would be foolish to discount that potential yet. While it is expected that many of the that have legalized, there is no existing entirely. issues will be similar to other states, there marijuana infrastructure in Alaska. Alaska is unique among the states in will no doubt be issues unique to Alaska. While underground growers in Alaska that approximately 80% of its land is inac- At the time of writing, it is uncertain who have been producing extremely high-qual- cessible except by air or water. Both forms will be responsible for overseeing the in- ity cannabis for years, there is no structure of travel are usually regulated by the fed- dustry in Alaska. The Alcoholic Beverage in place for the legal manufacture or distri- eral government. Additionally, the federal Control Board may oversee the regulation bution of cannabis. Except for the ability government owns 69.1% of land in Alas- >> CONTINUED ON PAGE 54

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<< CONTINUED FROM PAGE 52 of cannabis, or the Legislature may create WHILE THE RIGHT TO OPT OUT IS NOT a Marijuana Control Board. This lack of certainty is difficult for both entrepreneurs UNIQUE TO ALASKA, THE SHEER SIZE OF and investors alike. However, Gov. Bill THE STATE MEANS AN OPT-OUT COULD Walker has announced that he expects the rules to come out within the nine-month ELIMINATE EFFECTIVE ACCESS TO LEGAL period outlined in Ballot Measure 2, meaning the rules should be available by CANNABIS FOR MANY ALASKANS. December 2015. Perhaps the most problematic issue is the right of local governments to opt out. ties. Second, although Alaska is a medical state, While the right to opt out is not unique to A final challenge for those wishing to there is no medical system to merge into Alaska, the sheer size of the state means take advantage of this opportunity is that the recreational one. This makes the roll- an opt-out could eliminate effective access Alaskans will likely be highly protective out much simpler. Third, in an industry to legal cannabis for many Alaskans. For of this industry. It likely won’t be possi- expected to be worth between $100 mil- Alaskans not on the road system, a local ble to move to Alaska and obtain a license lion and $250 million a year, every single opt-out means they could have to trav- without a significant period of residency. business will be a new business. Finally, el on federally-regulated means of travel It is also unknown what, if any, limitations due to the low population of many towns (ferries or airplanes) for hundreds of miles the state will try and place on investment in the state, it may very well be possible to to reach a legal market. This could reduce from outside money. open a canna-business that has little, or no, the size of the legal market significantly. Despite these challenges, Alaska should competition. However, depending on which communi- be on the radar of anyone serious about ties decide to opt out, this could create sig- the industry. There are several significant Ben Adams in a marijuana compliance at- nificant business opportunities for those advantages. First, the rules can be writ- torney with offices in California and Alaska. able and willing to create canna-business ten from the ground up, learning from the His firm advises clients involved in all aspects within reach of the prohibiting communi- Washington and Colorado experiences. of the marijuana industry.

54 | Marijuana Venture // February 2015

LEGAL PAGES

Stenquist ). A true party of interest, as defined by the Trademark licensing and WAC, is “any entity or person who exer- cises control over the licensed business in exchange for money or expertise.” conflicts with I-502 rules In addition, “The board will conduct an investigation of any person or entity who Agreements are traditionally based on royalties on sales exercises any control over the applicant’s By Neil Juneja business operations.” While any control is trademark is a Administrative Code 314-55-035 states left undefined, most will agree that quali- Aname, logo or slo- that a true party of interest is “any entity ty control over marijuana would be greater gan used in commerce or person who is in receipt of, or has the than “any” control. that allows a consumer right to receive, a percentage of gross or net There exists a direct conflict between to identify the source profit…” retaining one’s trademark rights while si- of a good or service. A royalty based upon sales would qualify multaneously not jeopardizing one’s I-502 Trademarks can even a trademark owner as a true party of inter- license. While direct control over the quali- be packaging, or in est. In such a case, failing to properly in- ty of goods must be avoided, other methods some cases, a sound or smell. It is into form the Washington State Liquor Control of control may suffice. One approach is to these marks that a company’s reputation, Board of this true party of interest is detri- control the use of the mark as opposed to goodwill and customer loyalty are stored. mental to one’s future business prospects in the quality of the product. In some cases, In many cases, the trademarks are the most the industry. Furthermore, non-Washington courts have upheld licensing agreements valuable asset of a company. licensors are never permitted to be a true where the trademark owner is familiar and When you find a can of Coca-Cola any- party in interest. relies upon the licensee’s own efforts to where on the planet, you can rest assured One possible solution is to charge a flat- control quality. Exactly what threshold of that it is essentially the same carbonic ac- rate royalty instead of a variable royalty familiarity is sufficient is not always clear. id-laced sugar water that you have grown based upon the number of units sold or the up enduring. The reputation of the product amount of revenue generated. A flat-rate TRADEMARK PECULIARITIES is well known and that goodwill is stored annual fee does not violate the letter of the Also, an interesting issue — previously in the brand. law. Other options that harmonize with the rare, but surprisingly common in the mari- A trademark license allows a trademark law are also available. juana industry — revolves around common owner to permit another party to use the law trademarks. same mark. Licensing a trademark is a A ROYALTY BASED A federal trademark registration grants beneficial method of extending the reach the trademark owner the right to prevent of a brand and increasing revenue without UPON SALES others from infringing the mark (or a con- enduring the additional resource costs of fusingly similar mark) throughout the US. production, logistics or sales. The one re- WOULD QUALIFY However, a federal trademark registration ceiving the license gains the use of an es- is generally unavailable for marijuana. Al- tablished brand, saving substantial expense A TRADEMARK ternatively, common law trademark rights and time of market penetration. In the mari- OWNER AS A TRUE do, in fact, exist. These rights accrue in juana industry, trademark licenses are high- the regions in which the mark is used in ly beneficial because each state has its own PARTY OF INTEREST. commerce. Therefore, a brand used in set of unique legal hurdles and market pe- commerce in other states but not in use in culiarities. It would be a substantial burden NAKED LICENSING Washington has no actual trademark rights for a single entity to enter so many markets When licensing a trademark, the own- in Washington. Consequently, prior to use- with disparate rules. er must maintain consistent quality of the in-commerce in Washington State, one is li- There are several issues with traditional branded goods or services. Neglecting to censing a right that arguably does not even trademark license agreements that can be do so results in a “naked license.” exist. When licensing a trademark for use fatal to a Washington recreational marijua- Naked licensing can lead to the abandon- in the recreational marijuana industry, it is na license. ment of the trademark and all associated incredibly important to work with counsel rights. This is due to the purpose of trade- that knows exactly what they are doing and ROYALTIES marks: to be a source identifier. If a mark is have a great deal of experience in respect to First, trademark license agreements tra- on products of inconsistent quality, the con- both intellectual property and I-502. ditionally have a royalty rate based upon sumer is ultimately harmed and the mark the quantity of sales. For instance, for ev- no longer functions as intended. One court Neil Juneja practices intellectual property ery branded unit sold, the trademark owner characterized a naked license as “inherent- and marijuana law with Gleam Law. He can be is paid a percentage of sales. Washington ly deceptive.” (First Interstate Bancorp v. reached by email at [email protected].

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tion postcard containing excellent new consumer education tips. A deeper look at strict These tips included starting with one low-dose serving, and suggested what a low-dose serving might entail. It also cau- liability for failure to warn tions consumers to wait up to two hours to gauge the effect of the product, not to mix Product manufacturers and retailers can be held responsible edibles with alcohol, and to keep edible By Michele Brooke products out of the reach of children. o continue our se- INFUSED PRODUCTS LEARNING CURVE More about the Cannabis Business Alli- Tries on the topic of Infused product manufacturers and pur- ance can be found at cannabisalliance.org. product liability, this veyors must appreciate that the average article focuses on strict new consumer entering the marketplace A NEW CONSUMER EXAMPLE product liability based may not have a sophisticated knowledge A new marijuana user — let’s call him on failure to provide about marijuana. In other words, the learn- John — purchases his first infused choc- adequate label warn- ing curve is substantial. For example, the olate cookie at his local dispensary. Mari- ings for marijuana (in- term THC (tetrahydrocannabinol), which juana is listed as an ingredient on the label, cluding concentrates or oils) and marijua- is the chemical in cannabis providing a as is the amount of THC. The label says na-infused edible products. psychoactive effect, even if listed on the the product contains 100 milligrams THC, The term “strict liability” is an intimi- product label, may be a foreign term to a and that one package contains four doses. dating legal theory, because it means legal new consumer. After the purchase, John gets home, liability without fault or negligence. This Furthermore, the plethora of marijuana packs his suitcase for a road trip and con- legal theory does not include the concept newbies may not understand the different sumes a quarter of the cookie. Nothing of intent. In other words, it may not matter levels of potency or happens. Ten minutes that a product manufacturer or distributer the concept of delayed POTENTIAL later, he eats another did something with intention to hurt any- effect. So it is up to quarter of the cookie; one. the industry to educate DEFENDANTS still nothing. So, he A defendant in a strict liability lawsuit consumers, and the thinks, what’s the big could be liable if the product had an in- product label could be IN A STRICT deal? These things adequate warning label when it left their the first step. don’t work. control. The label could be inadequate, This means, when LIABILITY John gets into his for example, if there were not enough in- considering a prod- FAILURE-TO- vehicle and drives. formation, or includes information that is uct label, one has to Suddenly, 30 minutes stated improperly. Potential defendants in ask whether merely WARN LAWSUIT into his trip, while a strict liability failure-to-warn lawsuit in- listing the amount of traveling at 70 mph clude the manufacturer, seller and distrib- THC, with nothing INCLUDE THE down the highway, the uter of a product. more, is adequate. THC kicks in. Stunned When flowers, oils or infused food Consequently, infused MANUFACTURER, by the sudden effect products are placed in the marketplace, product manufactur- of the THC, John does the manufacturer and purveyors have a ers, oil or concentrate SELLER AND not know what to do, duty to ensure that adequate warning la- manufacturers, and all and winds up getting bels are on the products and that those marijuana purveyors DISTRIBUTOR. into a horrible car ac- labels list potential risks and/or side ef- should take seriously cident, injuring other fects inherent in consuming the product. the warnings on their product label and/ people. John will definitely be sued by the Listing the risks is crucial, particularly if or packaging. people he injured. But, so will the cookie a risk or side effect may not be obvious For the foreseeable future, cannabis manufacturer, and probably the dispensary to the consumer. With the hundreds, if not manufacturers or purveyors, whether they owner who sold John the cookie. thousands, of infused products hitting the are selling cartridges, flowers, cookies, marketplace all over the United States, lozenges, beverages or any infused prod- WHAT A JURY MAY EVALUATE this is an issue the industry must give uct, should have a comprehensive plan Under a strict liability failure-to-warn careful attention, especially since most in place to educate their customers of the legal theory, a jury may be asked to decide states do not yet have marijuana-infused potential risks of their products. While the following in the lawsuit filed against product laws or regulations. Manufactur- attending an infused products conference the cookie manufacturer who also pack- ers, distributers and sellers can still be li- in Colorado this past October, the Colo- aged the cookie: able even if there are no formally-written rado-based Cannabis Business Alliance • Did the manufacturer sell/distribute rules broken. passed out an impressive edibles educa- >> CONTINUED ON PAGE 60

www.marijuanaventure.com | 59 LEGAL PAGES

<< CONTINUED FROM PAGE 59 not work the same job because of their ed to consuming cannabis products? What the cookie? injuries; compensation for pain and suf- about placing a QR code on the product, • Did the cookie have potential risks or fering, etc. so that a mobile phone could scan and re- side effects that were known (or know- Potential liability is also a reason to trieve additional information? able) in light of current scientific knowl- make sure your company has an adequate What about, as a matter of policy, in- edge that is generally accepted in the insurance policy to help in the unfortu- cluding a warning postcard with the pur- scientific community at the time of man- nate event of a lawsuit. chase of any product containing marijua- ufacturing? na? • Did the potential risks or side effects MORE ADEQUATE WARNINGS The objective of this article is to urge present a substantial danger to the person What more could that cookie label have product manufacturers, and any purveyor consuming the cookie in an intended or said, besides simply listing cannabis as an in the stream of commerce, to understand reasonably foreseeable way? ingredient and the amount of THC? the legal standards in play, and to make • Would ordinary consumers, such as Would the label have been more ade- it a priority to come up with a warning John, have recognized the potential risks quate if it stated a lower recommended strategy that adequately reflects those le- or side effects of the cookie? dosage? Is 25 milligrams THC too high gal standards. • Did the manufacturer fail to adequate- of a dose for a novice patient? (The Wash- To develop a strategy, begin with re- ly warn or instruct of the potential risks ington State Liquor Control Board deems searching the websites of industry lead- or side effects of consuming the cookie? one serving size to be 10 milligrams ers, or contact a lawyer knowledgeable • Was the lack of sufficient instructions THC.) about the cannabis industry; this will or warnings on the cookie label a substan- Could the warning have been more ensure the safest path possible for you to tial factor in causing harm to the injured meaningful to John if the label stated that limit potential liability. persons? the intoxicating effect of the THC could If each question is answered affirma- be delayed by one or more hours? Should Michele Brooke is an attorney in California tively, the harmed people could recover the label warn against driving under the who practices civil litigation and civil can- lost earnings for time off work recover- influence? nabis law (www.brookelawgroup.com). She ing from injuries; financial compensation What if a website were advertised on is a member of Americans For Safe Access, for current and future medical expenses; the label for customers to get more infor- NORML and the American Herbal Products future lost earnings if the plaintiff could mation about THC and precautions relat- Association, Cannabis Committee.

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LAW OFFICE OF JEFFREY STEINBORN 206-622-5117 [email protected] www.steinbornlaw.com LEGAL PAGES Beyond the license: Understanding compliance Don’t overlook the importance of avoiding the first violation By David Kerr t this stage of the field contacts (15); and law enforcement Agame, we have contacts (3). a full year of experi- These enforcement visits resulted in 158 ence, fits and starts, marijuana administration violations being and progress in the reported by the Liquor Control Board. burgeoning recreation- These early violations resulted in enforce- al marijuana industry ment actions that range from verbal warn- in Washington State. ings (119); written warnings (26); fines While there are a lot of applications still (10); and even the suspension of a license in the Liquor Control Board pipeline (as (1). of this publication only about 23% of ap- There were 26 licensees that had multi- plications are at a point where you could ple violations in the brief period between call their licensing process complete), we Sept. 4 and Nov. 26, 2014. One licensee are starting to get an impression of what garnered six enforcement violations, in- the post-licensing landscape will look cluding failure to submit monthly tax re- like. The one area that I find particularly ports and/or payments; using unauthorized interesting and that I think applicants and pesticides, soil amendments, fertilizers, licensees should begin to focus on is: How other crop production aids (twice); viola- are you going to stay in compliance with tions of a board-approved operating plan the Liquor Control Board rules to avoid (twice); and failure to utilize and/or main- violations and enforcement actions? tain traceability. The scope of the most common viola- COMPLIANCE ENFORCEMENT ACTIONS tions that were reported include: Failure The licensing process was and continues to submit monthly tax reports and/or pay- to be harrowing. Those who have made ments (80); advertising violations (18); it through and those still plugging away failure to maintain required security alarm have to think: “Once I get the license, ev- and surveillance systems (11); failure to erything will be easy.” utilize and/or maintain traceability (10); Different yes, but easy? Perhaps not so violations of a board-approved operat- much. ing plan (8); violation of transportation The recreational marijuana business in requirements (5). There was one “mis- Washington State is a highly regulated cellaneous violation” of WAC 314.34.30 market where the rules are newly minted — cigarette and other tobacco products and not yet fully interpreted nor fully im- violations. The one license suspension plemented. However, since licenses have was for failure to utilize and/or maintain started to be granted, the compliance en- traceability (processor or retail licensee). forcement process is beginning to accel- erate. ENFORCEMENT SCHEME Between Sept. 4 and Nov. 26, 2014, the Penalties for compliance violations by Liquor Control Board made 768 reported marijuana licensees or employees are bro- marijuana enforcement visits. While a ma- ken down into four categories: jority (55%) of these enforcement visits Group One: Public safety violations appear to be a routine part of the license (WAC 314-55-520) process (final inspections, new licenses Group Two: Regulatory violations inspection or phone contact), there were (WAC 314-55-525) 347 of them (45%) that involved com- Group Three: License violations plaint investigations (87); applicant site (WAC 314-55-530) verifications (49); premises checks (193); >> CONTINUED ON PAGE 64

www.marijuanaventure.com | 63 LEGAL PAGES

<< CONTINUED FROM PAGE 63 lation by the Liquor Control Board. a good place to start being proactive about Group Four: Producer violations in- The key to protecting your business compliance, and a good place to find pro- volving the manufacture, supply, and/ from the potentially harsh penalties that fessionals and resources to guide you and or distribution of marijuana by nonretail can flow from multiple or repeated vio- your staff. licensees and prohibited practices between lations is to avoid the first violation alto- • Action: Being proactive about com- nonretail licensees and retail licensees gether. pliance is the key. The Liquor Control (WAC 314-55-535). • Be proactive about compliance: Ev- Board rules expressly provide for mitigat- Penalties for violations in any one of ery I-502 producer, processor and retail- ing circumstances that may result in fewer the categories are on a graduated scale er should have an active and proactive days of suspension and/or lower monetary and they increase significantly depend- compliance plan that includes education, penalties if you are cited for a violation. ing on the type and the frequency of the action, auditing and defense. Don’t close Examples of mitigating circumstances in- violation by the license holder. Penalties your eyes and convince yourself that “it clude: having an employee training plan range from the relatively benign (verbal will be okay if I am honest and try my that includes annual training; and having or written warning) to increasingly severe best.” a signed acknowledgment on file for each penalties that include fines between $500 That is not the way it works. Even the employee addressing responsible marijua- and $15,000; suspension of the license for most honest, most dedicated licensee can na handling and sales policies. 5-30 days; destruction of 25-50% of the run into compliance and violation trouble These are just a couple of examples pro- harvestable plants; or cancellation of the through inattention, complacency and a vided in the rules by the Liquor Control license. lack of focus on compliance as a key ele- Board. The takeaway from this is simple. If it isn’t obvious, let me just say it — ment of the business. Having a proactive compliance program they aren’t messing around. Compliance • Education: Start with the rules them- that you implement with your employees and compliance enforcement is a serious selves. Read them, understand them and is likely to reduce the chances that you get business. No one wants to find their busi- follow them. If you are the kind of per- hit with a violation in the first place, and ness in a situation where they face fines, son whose eyes glaze over when you start is likely to reduce the penalty if you are possible license suspension, the destruc- reading things like the Washington Admin- unfortunate to get hit with an enforcement tion of a significant portion of their crop or istrative Code — I fully get that! That’s violation. even cancellation of their license because okay, because there are classes, workshops • Auditing: Don’t just assume you are they get hit with multiple or repeated vio- and training seminars out there that can be in compliance because you held a train-

64 | Marijuana Venture // February 2015 LEGAL PAGES ing session with your employees and no Control Board rules provide that you have alty for the second violation is a $5,000 one has told you that your systems aren’t 20 days to take one of the following ac- monetary fine and destruction of 25% of working or are insufficient. You should tions. You can: (a) Accept the recommend- your harvestable plants! check and test your systems, practices, ed penalty; or (b) Request a settlement Now you are in deep trouble, and fac- procedures and policies. conference in writing; or (c) Request an ing a potentially catastrophic blow to the If you are a retailer, have someone try to administrative hearing in writing. viability of your business. But what if you buy marijuana without proper ID. On the There are potentially serious conse- had taken a different approach on your first day you are open, no one is going to quences of merely admitting the violation first violation? get away with this, but on the 365th day and accepting the enforcement penalty. If you had elected a settlement confer- you are open, your employee practices slip However, if the first violation doesn’t car- ence and/or had taken the violation to an a little bit and set you up for a violation. ry an onerous penalty, you might be tempt- administrative hearing, you might have Make sure your traceability system is ed to ask if it is worth the time energy and been able to avoid or mitigate the first vi- fully operational, that employees know effort to fight it. It is and it could make a olation and not have been faced with the how to use it, and that using it is drilled real difference later. potentially devastating consequences of a into the business. Test your security sur- Here’s an example. Let’s say your pro- second administrative violation. veillance systems. Understand the re- ducer/processor operation gets hit with a Let me repeat myself. The Liquor Con- cord-keeping requirements and audit your violation of the transportation require- trol Board isn’t messing around. Com- records and record-keeping practices reg- ments (WAC 314-55-085). pliance and compliance enforcement is a ularly. The penalty for the first violation is a serious business. Every I-502 producer, Do a spot check on employee ID/securi- fine of $2,500. Not a slap on the wrist, but processor and retailer should have an ac- ty badges. The Liquor Control Board has not so steep that it would be unreasonable tive and proactive compliance plan that already issued three violations for some- to consider just paying it and moving on. includes education, action, auditing and thing as simple and routine as an employee So you admit the violation and just accept defense. failing to display required security badge. the penalty. • Defense: Let’s say that despite your Then, let’s say, you stumble again (de- Attorney David Kerr serves business clients best efforts and good intentions, you do spite your best efforts and good intentions) throughout the state, including an emphasis on find your business getting hit with a notice and you get hit for a second violation of the emerging legal, regulatory and compliance of an administrative violation. The Liquor the transportation requirements. The pen- issues facing new cannabis businesses.

www.marijuanaventure.com | 65 Querkle is a hybrid cross between Purple Urkle and Space Queen. Photo by Juice Oregrown. Strains on the Brain Part II: Making selections among sativas, indicas and hybrids By Chris Bayley it down with a group of master grow- sativas, consider only growing one crop. Sers and the topic of conversation will Although you can manipulate photope- This is the conclusion of a two-part undoubtedly include genetics. With thou- riods, it is thought that in order to get a series by Chris Bayley about strains sands of strains already on the market, and sativa to express all of her subtleties, fol- and strain selection. Part I was in the more being added every day, it’s easy to lowing a more natural photoperiod will ac- January 2015 issue of Marijuana Venture and can be found online at get swept up in the hype and nomencla- complish this and using a light deprivation www.marijuanaventure.com. ture. system will make it possible. In the January issue of Marijuana Ven- A light deprivation system can be used ture, we started the conversation about to follow through the four-month flower- finding the perfect strains for your envi- ing period at any time during the summer Pure indicas rarely reach more than ronment. This month, we’ll dive more into months. Use it to coincide with the natural eight feet in height, regardless of the veg- the differences between sativas and indi- light cycle outdoors. Assuming you live etative period, so the sooner they can be cas and why those differences matter, par- in the Northwest and want to time your planted, the greater the yield. Indicas are ticularly to those growing outdoors. harvest to the naturally occurring outdoor the original “hash plants,” and in fact, light schedule, you’ll want to time the crop are what is responsible for most of to- SATIVAS to finish in mid-October. This means the day’s strains expressing such a high G.S.I. Sativas growing in nature can take any- crop should be induced around mid-June. (glands per square inch). For those of you where from 12 to 20 weeks to flower. In Depending on the genotype, you’ll want to wanting to make hash, using pure indica order to finish a pure sativa in the North- grow the plants no longer than a month to or indica-dominant hybrids will yield the west, a greenhouse with the use of light keep them in check or utilize plant manip- best results. deprivation techniques will be needed. ulation techniques to keep them corralled. Geographically speaking, a sativa’s nat- A longer growing period would result in HYBRIDS ural habitat ranges between 30 degrees unruly plants — remember, pure sativas The majority of popular strains being north and south of the equator. The photo- can reach heights of 25 feet. When com- circulated today are hybrid crosses, mean- period inside this latitudinal range weaves puting the shortened photoperiod for a ing they are the offspring of sativas and in and out of a five-hour time differential sativa’s internal clock, keep in mind that indicas (and sometimes ruderalis). Hybrid throughout the course of the seasons in a at the equator the change in day length crosses, especially if they are from pure year. At the equator, that time differential occurs at a minute a day, as compared to landrace strains (Thai and Pakistani, for is two hours. This knowledge is import- around three minutes a day in Washington. example), really open the doors of breed- ant because if you’re trying to emulate ing potential. the characteristics of a savvy sativa from INDICAS First, when you cross strains that are at Thailand, you need to duplicate the envi- For those in the northern latitudes, indi- the far end of the family spectrum, such ronment from where the plant originated. cas are a more appropriate choice for those as an indica and sativa, the resulting off- To duplicate these natural conditions producers growing outdoors. This species spring have greater odds of displaying outdoors in Washington State would be is not only more acclimated to our area, what is known as hybrid-vigor. The more impossible without light deprivation tech- but also has naturally occurring flowering pure-bred and fit the genotypes used in the niques within a climate-controlled green- times that are especially suited to the re- crosses, the greater the strength and health house. For those who wish to grow pure gion. >> CONTINUED ON PAGE 69

www.marijuanaventure.com | 67 N-butane (R600) $150.00 N-propane (R290) $150.00 Isobutane (R600a) $150.00 70% R600 / 30% R290 Blend $150.00

N-butane (R600) $240.00 N-propane (R290) $240.00 Isobutane (R600a) $240.00 70% R600 / 30% R290 Blend $240.00 << CONTINUED FROM PAGE 67 (vigor) will be. Vigorousness displayed in EXCITING AND offspring should always be the baseline in plant selection. UNCHARTED, WE Other exciting possibilities that ex- ARE NOW FREE TO ist when making hybrids are the ability to tweak maturation times, cannabinoid EXPLORE profiles and terpene expressions. Picture all the traits that make a sativa attractive: CANNABIS’ LONG- exotic tastes and floating cerebral type effects, bred into an indica, resulting in a HELD MYSTERIES. heavier yield that matures in late Septem- ber. Bingo! propaganda that circulates about marijua- When you add up more than 85 differ- na, and the fact that growers are chasing ent cannabinoids and 120 terpenes in the the potency curve. A good thing to keep cannabis family, the possibilities in hybrid in mind for producers is that the cannabis crosses are limitless. For those produc- market will eventually have to parallel the ers hoping to grow early maturing plants consumer demand, which will require dif- with sativa characteristics, hybrid crosses ferent grades of potency. As the percent- should be sought out. There are literally age of users climbs, we will see the need thousands of hybrids, and it’s just a matter for strains that are testing between 8% and of testing them out to see which ones will 12% THC, as well as those that are 20% work in your environmental conditions. and beyond. Over the last decade and a half, a class of For the time being, the prices retailers hybrids has been developed that are known are paying for cannabis seem to be based as auto-flowering strains. These hybrids solely on THC levels, as opposed to the ef- flower regardless of light cycle just like fect, taste or burnability. It may be tempt- conventional annual plants. Auto-flower- ing to continuously search out the most ing strains were thought to be developed potent weed to grow. However, in the long using the cannabis species ruderalis. In its run, demand will require different levels of natural setting, the ruderalis species will cannabis potency to have places on retail- go from germination to fruition in as little ers’ shelves. as 10 weeks. For those of you that do not have enough Also on the market are a class of hybrids experience with cannabis, a really unique called auto-fems, a term that refers to au- high in the 8% to 12% range can translate to-flowering strains that have been- femi into a fantastic experience that casual us- nized. If you plan on breeding with these ers will appreciate. types of hybrids, do so with auto-flowering In the end, remember this: Any strain varieties as opposed to auto-fems. If you can be grown anywhere. You just have to breed with auto-fems, there is a greater match the strain to its optimal growing en- chance of passing along hermaphroditic vironment. The closer you can dial in that traits in successive generations. Other- environment, the greater the return you’ll wise, auto-flowering and auto-fem strains get from your plants. provide a great advantage to finishing Exciting and uncharted, we are now free plants outdoors in temperate climates. to explore cannabis’ long-held mysteries. Over the last decade, it has really become HEAD OF HIGH accepted that it’s the interaction of ter- The effect cannabis has on a person is penes and cannabinoids together, which perhaps the single most important aspect are responsible for the endless experiences to consider for producers. The potency when using cannabis. The cannabis plant and effect from certain cannabinoid pro- is a living potpourri of therapeutic essen- files are two separate things to take into tial oils rivaled by none in the plant world. consideration when selecting a particular These terpenes and cannabinoids coalesce phenotype. into what all users are searching for — the Yes, potency is important, especially for experience, or head of high. people with medical conditions. However, there’s a certain percentage of the popula- Chris Bayley owns and operates a consult- tion who view modern cannabis cultivars ing company called Hortistructure, Inc. that as a hard drug. This is partly because of services all of Eastern Washington.

www.marijuanaventure.com | 69 Feral hemp grows amid a wheat field in Nebraska. Photo by Michael Hughes. Cross-Pollination: Myth vs. Reality A distance of about 10 miles should separate industrial hemp and marijuana crops By Joy Beckerman h, the irony. On the one hand, mar- wild] and deliberate, now that it is legal to Oijuana and hemp activists have been cultivate there). AFTER ALL, tortured for decades by the DEA’s ex- No doubt it will be helpful to found our ceedingly absurd stance that marijuana discussion on a necessary botany lesson, WE DON’T SEE growers will use industrial hemp fields to especially since the most common mis- THE STATE OF camouflage their marijuana plants. On the understanding about the difference be- other hand, there has recently arisen the tween marijuana and industrial hemp is KENTUCKY IN hysterical stance by some populations of that hemp is the male and marijuana is the outdoor marijuana growers that marijuana female. In fact, nothing could be further AN UPROAR. and industrial hemp fields must be kept from the truth. extraordinary distances apart in order to “Cannabis” is the plant genus. “Sativa” in crop generally planted about four feet avoid cross-pollination. is Latin for “sown” or “cultivated” (and is apart for its medicine- or narcotic-rich While the DEA stance is unequivo- included in many scientific plant species leaves and buds, whereas industrial hemp cally false and has no basis in reality, names). And the “L.” we often see asso- is a low-resin crop generally planted about the cross-pollination hysteria is actually ciated with Cannabis sativa merely stands four inches apart for its versatile stalk and grounded in truth, albeit recently a distort- for the surname initial of Carl Linnaeus, seed. ed and emotionally-based version of the the Swiss botanist who invented taxono- The different kinds of marijuana are truth. my. Cannabis sativa is a member of the classified as “strains” and the different Greed often inspires irrationality. Let’s Cannabaceae family. Within the Cannabis kinds of industrial hemp are classified as have an intelligent conversation based in sativa plant species, we have the drug type “varieties” and “cultivars.” fact because there is no need for hysteria known as “marijuana” and we have the Industrial hemp is non-psychoactive and cross-pollination is a common agri- oil-seed and fiber type known as “indus- with a higher ratio of CBD to THC, thus cultural issue with a common agricultural trial hemp.” smoking even several acres of it will not solution … one that would never require a Both plant types – marijuana and in- result in achieving a high; conversely, distance in the realm of 200 miles between dustrial hemp – can be dieocious, which only a memorable headache is achieved, plant species types. is to say they can be either exclusively regardless of Herculean effort. Marijua- After all, we don’t see the State of Ken- male or exclusively female; and they can na flower production and industrial hemp tucky in an uproar. Make no mistake, also be monoecious, which is to say they production cultivation processes are dis- Kentucky’s number one cash crop is out- can have the staminate (i.e. the male pol- tinctly different. door marijuana. Meanwhile, Kentucky is len-producing part) and pistillate (i.e. the Finally, there is no such thing as a simultaneously the nation’s top industrial female ovum-producing part) on the same plant or plant species known as “Canna- hemp producer (both feral [i.e. leftover/ plant. However, marijuana is a high-res- >> CONTINUED ON PAGE 72

www.marijuanaventure.com | 71 << CONTINUED FROM PAGE 71 New! I-502 Compliant Policies at Lower Rates bis hemp” and hemp is not a synonym for marijuana, pot, ganja or any other euphemisms. Botanists have argued for ages over whether a separate plant species “Cannabis indica” exists, and that age-old debate is not going to be addressed now. The significant difference between the two types that effects cross-pollina- tion and legitimately frightens marijuana growers is that hemp plants go to seed fairly quickly and would thus pollinate any marijuana plants growing nearby. This A Division of Premier Southwest Insurance Group is botanically analogous to field corn and sweet corn — one of which is grown for human consumption, the other is grown for animal consumption. Corn producers take great measures to America’s Marijuana Business prevent any cross-pollination between their field and sweet corns, including growing the different varieties of corn at Insurance Experts different times or making sure there is sufficient distance between the different fields. Either way, these corn producers do what is necessary to ensure that pollen 1-855-507-2622 carrying the dominant gene for starch syn- thesis is kept clear of corn silks borne on www.PremierDispensaryInsurance.com plants of the recessive (sweet) variety. >> CONTINUED ON PAGE 74

72 | Marijuana Venture // February 2015

The University of Kentucky grew a research plot of industrial hemp in 2014. Photo by Matt Barton, UK College of Agriculture Communications Department.

<< CONTINUED FROM PAGE 73 na grows, but you’d better believe that – tifying Agencies (AOSCA), which is the Cross-pollination of hemp with marijua- like every other state in the nation – there’s global agency to which most developed na would significantly reduce the potency a whole lotta marijuana being deliberately countries subscribe for agricultural pur- of the marijuana plants. Although hemp cultivated outdoors; and on quite a grand poses, has completed its draft industrial farmers are not going to want marijua- scale in Kentucky, which learned centu- hemp seed certification regulations. Those na cross-pollinating with their hemp and ries ago that Cannabis grows exceeding- rules include a range from a minimum dis- increasing their hemp’s THC content, it ly well in that climate and soil. Kentucky tance of three feet to a maximum distance would be entirely more disastrous for the has always been the heart of our nation’s of three miles between different pedigrees marijuana grower due to the cost of pro- industrial hemp farmlands, thus Kentucky and cultivars of industrial hemp. This is ducing and value of selling medical and is covered with more feral hemp than any the same with Health Canada’s industrial adult-use marijuana. other state. This issue of marijuana and hemp regulations. The concern is real. The concern is val- hemp cross-pollination is old news and But we are talking about safe distances id. But the concern does not merit the lev- no news at all to the marijuana growers between two plant types – marijuana and el of hysteria that appears to have arisen of Kentucky, who experience and demon- industrial hemp. Absent intense research in Washington. We must take a note from strate no sense of hysteria compared to and collection of hard data that will be in- Kentucky. Washington. teresting to conduct as we move forward Industrial hemp is primarily pollinated Global industrial hemp leader and pro- and funding becomes available, experts by wind, and most pollen travels approx- fessional industrial hemp agrologist An- agree that a distance of 10 miles between imately 100 yards, give or take. Bees, of ndrea Hermann, who has been a certified hemp and marijuana fields is exceedingly course, can also pollinate hemp; and bees Health Canada THC sampler since 2005 appropriate to avoid cross-pollination. Or travel up to three miles from their hives. It and is the president of the U.S. Hemp as Anndrea Hermann would say, “a nice, is also true that, depending on the weight Industries Association, has assisted with country road drive!” and size of any plant pollen, combined creating and reviewing hemp regulations This is not a complicated issue or a new with other natural conditions, wind-borne in Canada, the European Union, South issue. This is basic agriculture. Marijuana pollen can technically travel up to 2,000 Africa, Uruguay, Australia, New Zealand and industrial hemp are best friends and miles from the source. Yes, it’s true, up to and several states in the U.S. Hermann this is no time for them to start picking 2,000 miles. And also it would be beyond refers to this issue of cross-pollination as unnecessary fights with one another. Ten ridiculous to give serious agricultural con- the “Cannabis Clash” and “Cannabis Sex miles, folks. Ten miles! sideration to this extreme factoid for en- 101.” So what is the answer? What is a tirely obvious reasons. safe distance between marijuana and hemp Joy Beckerman is the president of Hemp Ace Cannabis case in point: Kentucky. Ken- fields? International and president of the Washington tucky may not have legal outdoor marijua- The Association of Official Seed -Cer chapter of the Hemp Industries Association.

74 | Marijuana Venture // February 2015

Cullen Raichart, CEO of GreenBroz.

a great deal of pavement pounding for Raichart, the CEO, and Turner, the COO. GreenBroz success the The first trade show they attended brought little in the way of notoriety; it was geared more toward culture and consumers than result of perseverance the business professional GreenBroz need- ed to reach. Company’s fastest machine can trim eight pounds per hour A road trip to the Emerald Triangle in By Garrett Rudolph Northern California saw similar results — rowing up around the print industry, Raichart brought that mentality to the an awful lot effort; not much in the way of GCullen Raichart developed an early cannabis industry, when he and Aaron returns; mounting discouragement. appreciation for quality machinery. Turner launched GreenBroz Inc. in De- “But we had all this time and money in- “Printing presses are exceptionally pre- cember 2012, but the road from start-up to vested, so it wasn’t like we were going to cise and very, very well built,” Raichart success story — even in the midst of the stop,” Raichart said. said. “They’re designed to last 35, 40 years Green Rush — wasn’t exactly paved with While that initial road trip to Northern and run all the time. When your machines dollar bills. California didn’t amount to much in sales, don’t work, you’re not working.” The early days of the company featured >> CONTINUED ON PAGE 78

76 | Marijuana Venture // February 2015

<< CONTINUED FROM PAGE 76 it did lead to a new design for a prototype dry trimmer Raichart developed. “It was the ugliest thing ever, but I knew that I was on to something pretty signifi- cant,” he said. The GreenBroz dry trimmer was a turn- ing point for the company, resulting in a $60,000 sale to a Northern California trim- ming machine distributor and giving the San Diego-based company the momentum needed to push forward. However, the hunt for investment cap- ital remained a fickle obstacle. Raichart and Turner connected with The ArcView Group, first with an online presentation, then with a live presentation in Boston. “We had a great reception, but it was pulling teeth from there,” Turner said. GreenBroz had some proven technol- ogy, intellectual property and a success story. But potential investors — primarily bringing non-cannabis money to the ta- ble — were looking for something more definitive. They were looking for a track record and some indicator of return on in- vestment. “Getting past that initial interest didn’t happen,” Turner said. “A lot of good things came out of it, but we still had no money.” It was back to the drawing board. The company formed an advisory panel, re- vamped its corporate structure, developed a larger dry trimmer than its standard unit, and began preparing for another ArcView presentation set for June 2013 in Denver. Meanwhile, Raichart went back to the original retailer that had made the $60,000 purchase. He presented the GreenBroz pAaron Turner stands next to the GreenBroz Inc. commercial dry trimmer. commercial dry trimmer, a machine capa- prefer hand-trimmed buds and will never pared to hand-trimmed bud. ble of processing eight pounds of flower consider using a machine to do the me- Raichart added that unlike human work- per hour (compared to the standard trim- ticulous work of trimming. But Raichart ers that experience fatigue, machines per- mer at two pounds per hour). Based on disputes the belief that hand-trimming is form at the same pace and quality through- Raichart’s presentation, the distributor always better than using a machine. out the day no matter how long they run. committed to buying 30 commercial dry “We’re not claiming we’re better than “Our vision of tools came from our use trimmers. hand-trimmed,” he said. “We’re claiming of tools,” Turner said. “We’ve found that “And these are $10,000 machines,” we’re as good.” there were a lot of products in the mar- Raichart said. “Every strain, every phenotype has its ketplace that cost a significant amount of “I got that information right before I got own shape,” Turner added. “Our machine money and didn’t work. You buy them, on stage to do the presentation (in Den- allows the bud to retain its shape. It’s a leaf you try them, you shelve them and they ver),” Turner said. “I gave the presenta- trimmer, as opposed to a bud trimmer.” collect dust. Rarely were we excited about tion, went out to the parking lot and had Raichart flashes back to his original what we bought. We’re very particular meetings set up with investors before I demonstration of the prototype dry trim- about machinery. It should be well built even got to my car.” mer. Although the red-and-orange aesthet- and it should function well and do what GreenBroz capitalized on its newfound ics may have been stomach turning, “the you want it to do coming out of the box. backing, finishing 2014 with nearly half a trim quality had jaws dropping,” he said. That’s the driver for quality and function million dollars in sales, having sold every According to Turner, lab testing in- of the machines Cullen invented.” machine it built. Yet, the company still dicated bud trimmed by the GreenBroz From a financial standpoint, machine faces an uphill battle, as many growers machines lost only about .75% THC com- trimming makes sense, particularly for

78 | Marijuana Venture // February 2015 larger growers. Assuming the average worker trims a pound of buds in about six hours, it would take 15 full-time employees working one week to finish a 100-pound harvest (or about $6,000 at minimum wage). The GreenBroz commercial trimmer can churn through the same amount of product in about 12.5 hours. GreenBroz currently produces four dif- ferent machines: the standard and com- mercial dry trimmers, a standard medical trimmer with a UV germicidal lamp and a tumbler. “We’re trying to be the solution provid- er from an equipment standpoint for peo- ple processing cannabis,” Turner said. Whether a producer is harvesting 100 pounds a season or 50 pounds a day, GreenBroz had a machine to fit their needs, he said. Moving forward, the company plans to remain at the forefront of innovation, the founders said. “We have lots of ideas,” Turner said. “We’re perfectionists, so we’re constantly fine-tuning and making little adjustments to improve it more on almost every pro- duction run.” pBefore and after shots of a pair of buds. The bottom flower was trimmed by GreenBroz.

www.marijuanaventure.com | 79 Pre 97 Bubba CO2. Oil made by CO2 requires little additional processing

beyond the extraction process. CO2 concentrates are made without heavy metals, hydrocarbon materials or residual contaminants. Photo courtesy Beyond Buds.

found on marijuana plants. The machines are expensive and require several days of CO Extracts: training to learn how to operate, but have 2 a number of advantages. They are far safer to operate than butane extractors, because Making Concentrates carbon dioxide is not flammable. And any CO left in an extract is harmless, whereas An excerpt from Beyond Buds, the most recent book by Ed Rosenthal 2 large amounts of residual butane in poorly

arijuana extraction technology is atmospheric pressure, CO2 has no liquid purged BHO is not healthy. Mleapfrogging into the future. That state. It goes from a solid (dry ice) directly Large extraction companies are turning future is largely considered to belong to to a gas. But at pressures greater than 5.1 to CO2 because the equipment converts carbon dioxide, which normally exists as standard atmospheres, it does liquefy. large amounts of leaf and trim into some of 0.039% of the air in our atmosphere. Extract artists exploit the physical prop- the cleanest, most valuable cannabis prod-

We all have a basic understanding of erties of liquid and “supercritical” CO2 ucts in the world.

CO2. Plants use it. Humans exhale it. At to extract and concentrate cannabinoids CO2 extracts are four to five times as

80 | Marijuana Venture // February 2015 concentrated as the best buds yet they can be inhaled without the irritation of smok- ing raw cannabis. CO2 extracts can also be used to make super-potent edibles, topi- The following is an excerpt from Ed Rosenthal’s cals, and other marijuana-infused products. new book Beyond Buds — the first to cover the shift from smoking buds to vaping and dabbing OVERVIEW concentrates such as shatter, wax, budder, and CO extraction involves using cool, oil. A DIY guide to making butane and CO2 2 extracts, as well as kief, hash, tinctures, topicals, pressurized carbon dioxide in either liq- and edibles, Beyond Buds features full-color uid or supercritical form to strip the psy- photos of award-winning concentrates and choactive ingredients from the surface of highlights the best products to use, from basic to professional. Beyond Buds is available this fall — the cannabis plant. The CO2 is then purged from the solution, leaving the plant’s wax- order your copy online now at http://quicktrad- es, fats, lipids, and cannabinoids behind. ing.com/ or http://www.amazon.com/. >> CONTINUED ON PAGE 82

www.marijuanaventure.com | 81 Headband CO2 shatter. Photo by Nadim Sabella Photography.

<< CONTINUED FROM PAGE 81 Supercritical fluid has no surface- ten

The process requires tanks of CO2 and an sion. It moves through the vegetative ma- extractor designed to function under the terial like a gas and dissolves trichomes. CARBON DIOXIDE’S extreme cold and pressure of the process. Carbon dioxide’s supercritical state re- Gas is liquefied then pumped through a sults from a combination of temperature SUPERCRITICAL pressure vessel packed with cannabis. The and pressure. CO2’s supercritical range STATE RESULTS resulting mix is depressurized in a separa- begins at 87°F (30°C) and 1,070 psi. (By tor vessel, resulting in the cannabinoids, contrast, water goes supercritical at 700°F FROM A oils, waxes, and anything else in the solu- (371°C) and 4,000 psi.) Supercritical fluid tion falling out of the mix as the CO2 exits cannabis extraction is usually performed at COMBINATION the vessel and is vented off. 5,000 to 8,000 psi. “Supercritical” CO extraction refers to 2 “Subcritical” CO2 extraction uses CO2 OF TEMPERATURE extractions that occur beyond the “critical in its liquid state, below its critical point. AND PRESSURE. point” of carbon dioxide. Normally we Pressure of between 800 and 1,500 psi is think of CO2 in gas, liquid, or solid form. applied to CO2 at a temperature of 35°F But past CO ’s critical point, the molecule 2 (2°C)–55°F (13°C). The CO2 liquid is ceases to exist as a typical solid, liquid, or pumped through plant material and it dis- gas. Supercritical CO looks like a very 2 solves the oils and terpenes. Then the CO2 dense fog. >> CONTINUED ON PAGE 85

82 | Marijuana Venture // February 2015 CALL (360) 861-8142 THC Law Firm has represented more than sixty I-502 businesses across Washington state. Marijuana law is all we do!

Our Services Include: • In-House Counsel • Drafting I-502 Documents • Step-by-Step Licensing • Fighting Moratoriums Package • Liquor Control Board Appeals • On-Site Full Compliance Audit • Lawsuits Against the LCB

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• Lead Counsel for for experienced the Marijuana marijuana legal advice League • Lead Speaker for Marijuana (360) 861-8142 Workshops www.THCLawFirm.com ATTENTION! TOP DOLLAR PAID FOR TOP DOLLAR PAID FOR $ I-502 GROW AND I-502 GROW AND PRODUCTION LICENSE PRODUCTION LICENSE No long term partnership No long term partnership No profit sharing No profit sharing Call Scott 253.691.2560 Call Scott: 253.691.2560 Email: [email protected] Email: [email protected] This Hi-Flo system from Eden Labs can be used with a 5-hp compressor for energy efficiency. The air-drive liquid CO2 pump needs little maintenance. Photo by Brad Huskinson.

<< CONTINUED FROM PAGE 82 and temperature. ful residues, BHO extractions do contain is decompressed and returns to its gaseous The downside is supercritical fluid CO2 remnants of the extraction solvent, which state. The oils, consisting mostly of canna- reacts with moisture to form carbonic acid, makes many people reluctant to use these binoids, terpenes, and waxes, precipitate which turns oils rancid. For this reason all concentrates. Butane extraction has higher out and are collected on a nearby surface. material used for extractions must be com- yields than CO2, but butane is explosive, Supercritical fluid extraction has some pletely dry. while CO2 is not. CO2 has much higher advantages over subcritical (liquid) ex- CO2 supercritical extraction is likely the start-up costs than BHO as far as equip- traction. Supercritical fluids are faster ex- future of legal, marijuana-infused prod- ment. However, the start-up costs of a fully tractors because of the low viscosities and ucts because manufacturers can pinpoint permitted, legal BHO extraction center can high diffusiveness. CO is pumped through 2 molecules they want to extract and leave equal or surpass that of CO2 extraction. the extracting material 3 to 10 times using everything else behind. The end product supercritical, rather than 10 to 40 times us- contains virtually no residual CO2, which For a complete CO2 extraction method, and ing subcritical. Another advantage is that it we inhale with every breath and which is to learn more about purging, winterization, de- can be used to select particular molecules harmless. carboxylation, storage, and pressing, see Ed for extraction by manipulating pressure While CO2 extractions create no harm- Rosenthal’s Beyond Buds.

www.marijuanaventure.com | 85 GUEST COLUMN

ance can be implemented in recreational markets. One shortcoming still facing the Accountability for labs can testing industry is the need for a certified, third-party entity to conduct proficiency trials on labs. This would test each lab’s solidify testing process performance and reliability. The practice is routine in EPA and FDA labs and is ab- Cannabis industry remains in its infancy, even in science solutely needed to establish standardiza- By Aaron Stancik tion in cannabis testing. hen Initiative testing and turn it into a reliable science. Currently, CannaSafe is part of an in- W502 passed back Cannabis testing was developed from the ter-lab working group in Washington in 2012 in Washing- ground up without government oversight. State, organized by Kurt Johnson of TNW ton State, I immedi- Early on it was a free-for-all. Labs began Labs. This lab alliance was formed to ad- ately recognized the popping up everywhere, including mobile dress testing methodologies, and improve potential for cannabis testing labs operating out of the back of quality assurance testing in the Washing- science. Cannabis has vans. Inaccuracies between labs led to ton market. The working group is pro- been prohibited for 70 negative media attention about testing. viding input and direction to the Liquor years and completely blacklisted from sci- Early on, CannaSafe recognized the Control Board and Center for Laboratory ence. Cannabis is a natural product with lack of quality control in the testing indus- Science, which oversees lab certification. vast agricultural, industrial and medicinal try and saw a need for standardization. At Take a look at the current problem of potential. How could it be forbidden from the time, there were no accrediting bodies inflated potencies numbers in the Wash- science? working with cannabis testing labs. The ington market. The answer, of course, is the federal EPA and FDA are federal agencies with This has been a definite cause for con- government. Prohibition has stopped any no jurisdiction over cannabis. The DEA is cern. Producers are reporting cannabinoid research into cannabis by academia and tasked with criminalizing cannabis and is totals as potency, when they should only industry. This has prevented countless not a great partner for a testing lab. be counting decarboxylated THC. It’s fine advancements in agriculture, industry, sci- ence and medicine. It has also contributed ONE SHORTCOMING STILL FACING THE to a complete lack in quality control of a popular, widely-consumed intoxicant. TESTING INDUSTRY IS THE NEED FOR Cannabis testing labs are needed to test for potency, cannabinoids, residual sol- A CERTIFIED THIRD-PARTY ENTITY TO vents, heavy metals, pesticides and micro- bial contamination. Along with legaliza- CONDUCT PROFICIENCY TRIALS ON LABS. tion came regulatory systems and quality To prove its technical competency, Can- to report all cannabinoids to a consumer, control. naSafe became the first cannabis lab in the but that’s not an accurate measure of po- With I-502, Washington State voters nation to get accredited by the Internation- tency. created a new quality assurance industry al Organization for Standardization. The There are numerous cannabinoids in that had never existed previously. Other ISO is similar to the EPA and FDA, except cannabis, but only THC is considerably states are following suit with mandated that it is an international agency. In the psychoactive. THC-A, the acidic form of testing in both medical and recreational cannabis industry, ISO accreditation has THC, is non-psychoactive and must be de- markets. This is providing new opportuni- became the industry standard. In Wash- carboxylated by heating to become active. ties in private industry for scientists. ington State, the Liquor Control Board ad- Simply adding THC-A and THC will not Before recreational cannabis emerged, opted protocol from ISO/IEC 17025:2005 give you potency. You have to first convert testing labs were operating in self-regu- and implemented it into its regulations for THC-A into THC equivalents and then lated medical markets. They were doing labs. add that amount to the THC already pres- business in a legal gray area, which in- Since there has been no action on the ent to calculate potency. curred certain risks and challenges. Now, part of the federal government to regulate For example, a flower sample with recreational cannabis markets are requir- the quality of cannabis, there is no equiva- 22% THC-A and 1% THC has a potency ing that cannabis be tested. Cannabis sci- lent to the EPA or FDA in the United States of 20.3% THC — not 23%. A conversion ence is now a bona fide industry. Labs are to provide oversight on cannabis markets. factor of 0.877 is used to convert THC-A being licensed and certified to provide It has been left up to labs to seek higher ac- into THC. This lowers the combined sum quality assurance. creditations and prove they are performing of both species. It is not enough to just add This protects the consumer, and ensures at the highest scientific standard. THC-A to THC; this approach will lead to cannabis products are of the highest qual- Washington and Colorado have pro- a potency value that is around 3% higher ity. It has also helped legitimize cannabis vided a framework for how quality assur- >> CONTINUED ON PAGE 88

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<< CONTINUED FROM PAGE 86 medical cannabis researcher of the year in the above example. by Americans for Safe Access. Phytatech This mathematical nuance has led to counts Dr. Arno Hazekamp, a world-re- over-reporting of potency in Washington nowned cannabis scientist, on its advisory and an unrealistic amount of flower being board. considered greater than 30% THC. Pro- Another pioneering project CannaSafe ducers intent on selling surplus bud are is working on is mapping the genealogy using this adding error to better market of modern and historic cannabis strains. their product to less-informed consumers. The project is being conducted by Phylos Some are purposefully maximizing the Bioscience and the Museum of Natural perceived potency to mislead customers History. The goal is to produce a cannabis and move product. family tree of all known genetics. We are Another factor that affects potency re- collecting samples for the Phylos Project porting is how moisture is factored into the and providing DNA from more than a hun- equation. Potency can be reported on fresh dred strains for the project. bud “as-received” or on a “dry weight ba- A joint project CannaSafe and Phylos sis.” Moisture content makes up around are working on has evaluated the use of 10% of cured flower weight. If potency is water activity measurements in cannabis reported on a dry weight basis, the value testing. Water activity is a useful quali- will be around 10% higher. For example, ty assurance parameter commonly used fresh flower with a potency of 20% THC in the Canadian cannabis market. Water would be 22% THC on a dry weight basis. activity is a measure of free water that is There is an argument for reporting available for microbial growth. It is a more potency on a dry weight basis. It allows meaningful measure for potential microbi- pHandheld tools made by Decagon Devices the potency of any strain to be compared can be used to monitor water activity during al contamination than moisture content. directly without considering moisture. the curing process. Agricultural, botanical and pharmaceu- Potency values are compared on a nor- tical products are susceptible to microbial malized scale. This allows for a more states forming an “accuracy” alliance. The contamination. Water activity measure- meaningful comparison. These are the intent is to foster industry-wide account- ments are used to control and eliminate types of questions our inter-lab working ability in cannabis testing and rapidly the proliferation of microorganisms. With group is tackling. advance the science. We are collaborat- a handheld water activity meter from The Werc Shop, a reputable testing lab ing with labs in various state medical and Decagon Devices, a cannabis producer with a great science team, is participating recreational markets. These labs operate in can monitor water activity during the cur- in the working group. I met these guys very different regulatory environments. ing process. at a Liquor Control Board lab meeting One of our collaborating labs is Eastern This allows a producer to control opti- in Seattle and got to Oregon Analytical in mal curing and prevent microbial growth. sit next to them for WATER ACTIVITY La Grande, Oregon. The perfect cure can be attained without a few hours and talk EOA Labs has been over-drying. Curing too long reduces shop. They know their MEASUREMENTS serving the medical yields and incurs a loss on the producer. cannabis chemistry market and is now It also changes the quality and aesthetics. and have academic ARE A GREAT branching into rec- Flavor, appearance and smell can all be credentials to match. reational cannabis affected by over-curing. Loss of terpenes Both the lab director, BAROMETER testing. The lab di- negatively affects the perceived quality Dr. Brad Douglass, FOR GAUGING rector of EOA Labs and customer appeal. Water activity mea- and the president are is Dr. Jeremy Riggle, surements are a great barometer for gaug- Ph.D. chemists. They QUALITY. a Ph.D. analytical ing quality. Look for labs like CannaSafe are the type of quali- chemist and professor that offer both water activity and terpene fied academics this industry needs. at Eastern Oregon University. analysis. CannaSafe Analytics is collaborating In Colorado, we are associated with with The Werc Shop to optimize testing Phytatech, a state-certified cannabis test- Aaron Stancik finished his doctorate degree methodologies and for inter-lab valida- ing lab. The director of Phytatech is Dr. in chemistry at the University of Idaho in 2012. tion. These type of collaborations help Noel Palmer, a Ph.D. analytical chemist His post-graduate work has been in academia ensure good laboratory practices are ob- that used to manage Montana Botanical and private industry and he has a passion for served and that we operate at the highest Analysis, another well-established canna- medicinal chemistry. He is currently the scien- scientific standard. bis testing lab. tific director of CannaSafe Analytics in- Pull We are working with labs in multiple Dr. Palmer was recently named the man, Washington.

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GUEST COLUMN Your business and politics Like it or not, you are an ambassador for this industry By M. Scott Sotebeer he 2015 Washing- building lasting relationships with the peo- Tton State legislative ple and organizations in your community session is under way, that may impact your future. and competition for How is the industry viewed in your com- headlines and priorities munity? Assume there is a general fear of is already fierce. Health the unknown, and many unanswered ques- care, education, trans- tions for your elected officials, local agen- portation, jobs, hous- cy heads and community leaders. You live ing, human services, parks, public safety, with this business every day. However, you new taxes — the themes never seem to have to appreciate that very few in the gov- change. ernment arena will be able to be on top of Beyond the state, these issues roll down all the issues. to the local level from the counties to the Every good lobbyist will tell you their smallest cities and villages. The recurring first job is to be an expert source of reliable reality is too few dollars and resources for information. You may want to first estab- too many very important priorities. lish yourself as an educator and source of So why should you care? This is the brave credible knowledge at every level where new industry bringing brand new money to you do business with the government. Sim- the state’s dry well, creating local jobs and ply asking if you can provide information tax revenue. We simply want to discuss and or answer questions about the business is fix our problems in this new and exciting a basic yet effective and often appreciated world of medical and recreational canna- gesture. bis — from taxes to banking, packaging, If you become a valuable, credible and advertising, product transportation, con- reliable resource for everyone you need to solidation and meaningful co-existence, do business with in government, you are revenue sharing for our local communi- more likely to be viewed as someone who ties, home grows, safe access, boundary deserves help. It is a simple premise. distances, edibles, moratoriums, confusing Also, assume that there are many well-en- and ambiguous rules and regulations ... and trenched beliefs and stereotypical images a few other items. Whoa. Equally compli- of the industry that are now attached to you cated. walking through the door. The risks are If you are a veteran of politics and the high from a political perspective. It is im- legislative and regulatory processes that portant to understand that political reality impact business, you know what it all is measured in perceived risk and the po- means, how the game is played and where tential for negative publicity. you fit. If this is all new to you as an en- trepreneur and business owner, then the WHAT TO DO government landscape can be a mine field. Step 1: Start at home. If you have not Who we are and how we present ourselves done so, make sure you know who your to decision-makers affect our individual local community representatives are, in- businesses and the industry as a whole. cluding key department heads who directly Likewise, being MIA, or otherwise disen- affect your canna-business. If you live in a gaged, also speaks volumes to politicians city, do you have a strong mayor or a city and community leaders. Out of sight is tru- manager? Do your city council members ly out of mind, or worse. represent a specific area or are they at- The stakes are high in both Olympia large? Political geography matters to your and at your local zoning office. So how do business. You should also know your coun- you approach government as an individual ty elected representatives and key agencies business owner in the cannabis industry? as well. And do not forget the sheriff, fire Applying a little common sense is a great officials and local police chiefs. They have place to begin a political education and for >> CONTINUED ON PAGE 93

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<< CONTINUED FROM PAGE 90 fire chiefs, etc. • Who is your congressional representative a significant community stake in the indus- • Do you know your elected representa- and do you know their district office staff? try. They are also likely to ask you what your tives’ positions on the topic of legal canna- Also, Senators Patty Murray and Maria Can- neighbors have to say. bis? A way to probe with an agency employ- twell have regional offices around the state. Step 2: Introduce yourself to your local ee is to ask if you can address any concerns Find yours and know who you can build a representatives, and do it in person. It does they might have about the cannabis industry relationship with. not matter if you are in Bainbridge, Walla or your business in general. If they oppose It sounds like a lot of time and work, and it Walla or Spokane, you have something to legal cannabusiness, be respectful, and know is. However, most, if not all, of the informa- offer by presenting yourself, your business why and what the objections are. Be credible tion you need to get educated can be found and the industry in a positive light. Politics and be real — even if you disagree. Your im- on the websites of local, state and federal is a numbers game, so there is no substitute age is our image! government, local agencies and individual for face-to-face introductions and meetings. • Do you know what other issues are most elected officials. Building relationships and If you cannot go in person, make introducto- important to your elected officials? What do learning to actively work in our local gov- ry phone calls and send emails to introduce they care about and what committees are they ernment process is an important investment yourself and your company. And it starts with involved in? A child health or education com- in your future success and that of the entire being polite and respectful to administrative mittee member may have a vastly different industry. Over time, we will all learn to do assistants, schedulers and staff members who view of the business than someone on the this together as our trade and professional as- are responsible for how things get done. Here agriculture, employment or economic devel- sociations mature. If you start now with a few are some other things to consider: opment committee. basic steps, you can help your business and • Depending on the size of the office, staff • You live and do business in a state and the entire industry to gain credibility, grow persons for elected officials are often respon- federal legislative district, and they may even and prosper. sible for keeping up to speed on specific is- be different, depending on your business and sues for their bosses, including canna-busi- home locations. Do you know the two state M. Scott Sotebeer has a Ph.D. in applied man- ness. Find out who has that responsibility representatives and state senator who repre- agement and decision sciences, specializing in and get to know them. Be an education and sent you? Make an appointment and go see leadership and organizational change. He is the information source for them. That goes for them. Leave behind a one-page overview that CEO of Hempzen Enterprises, Ltd. and founder of zoning and planning offices, water districts, introduces you and your business. USA Strategics, a management consulting firm.

www.marijuanaventure.com | 93 GUEST COLUMN Who will you hire to staff your retail store? All employees should be familiar with administrative codes By Colette Thomas very crucial deci- controls (such as in a bank/casino) ex- Asion upon open- plaining the procedure for all business ing your retail store is activities. … who will you hire? For example, what do employees do if I have seen stores an alarm trips, what to do in the event of hiring only family a sabotage situation, if a counterfeit bill is and friends and oth- passed, if someone has fake identification, ers who are strictly maximum transaction amounts, etc. against it. We encourage hiring locally, as It allows your business to operate very this can only help your reputation in the smoothly, when everyone is properly edu- eyes of the community. cated. All employees should have knowl- You can put an ad on Craigslist, post a edge of the Washington State Administra- sign on the front door of the store stating tive Codes (WAC 314-55) for Initiative a specific date and time 502. They must be aware that you will be hold- INVEST IN of the mandatory sig- ing open interviews, use nage, allowable hours your local newspaper, or YOUR TEAM of operation, required post on social media that warnings with each pur- you are hiring with an BY HIRING chase, advertising rules email to send resumes to. and so on. Some key character- DYNAMIC Your Liquor Control istics to be mindful of Board investigator will while making your initial INDIVIDUALS make random visits to selection include: outgo- ensure your retail store ing personality, excellent WHO PLAY remains compliant. They customer service skills will issue the appropri- and a clean criminal WELL WITH ate disciplinary action background. accordingly to the inten- Although product OTHERS ... sity of your violation. knowledge is a plus, keep in mind that you Most of your customers will return be- are not allowed to give medical cannabis cause you made a long-lasting impression advice to your customers. on their first visit. They will return based As you begin to narrow the field down on their initial experience, and of course, with your qualified favorites, we encour- purchase recreational marijuana. age doing a WATCH background check Your employees are an extension of on every potential employee. You would your company and their representation be surprised at how many people are dis- is an important key to your success. Do honest in an interview, when asked if there yourself a favor: Invest in your team by are any criminal charges that you should hiring dynamic individuals who play well be aware of. with others, and have a sparkling criminal They may seem like a perfect fit, only history. to find out that they have quite a lengthy rap sheet. Colette Thomas is a partner of Recreational We have created an employee manu- Marijuana Management, which provides con- al specific for each store. All employees sulting services for I-502 retailers on licensing must read it in its entirety and sign a form and compliance. RMM has assisted multiple stating so. We also have a set of internal retailers open for business.

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A LETTER FROM THE EDITOR

ly opposed to tomatoes. But if you deal in cannabis, you have to know where every A never-ending list: The potential commissioner, council member, mayor, senator, representative, governor, judge and president stands on marijuana. challenges of this industry 28. Likewise, few politicians are going to be outspoken supporters of the cannabis In the grand scheme of things, federal law is just one hiccup industry. obody expected tax; however, Oregon has the third-highest 29. Payment on terms is not allowed un- Nthe legal marijua- state income tax in the nation, according to der Washington’s current rules. na industry to be easy. The Tax Foundation. 30. Strict banking complications mean After all, making 7. Higher insurance rates. traditional lending services are non-exis- a living by breaking 8. Local bans and moratoriums. tent. federal law general- 9. Misinformation from opponents. 31. Restrictions on all transportation via ly doesn’t come with 10. Competition with the largely unreg- water or air. medical benefits and a ulated medical market. 32. Limitations on the number of total retirement plan. But I don’t think many 11. Competition with the black market. businesses licensed. people realized it would be this challeng- 12. Slow licensing process. 33. Limitations on how many business- ing, at least in Washington. Frankly, it 13. Residency restrictions. es an individual can own. shouldn’t be this tough, but as it stands, 14. Continually-changing rules. 34. Limitations on the size of each busi- marijuana businesses must contend with 15. Licensing fees. ness. restrictions and obstacles no other indus- 16. Absurdly strict seed-to-sale tracking. 35. Potential water restrictions, particu- try faces. 17. Electricity rates that seemingly tar- larly from federal sources or agencies that At Marijuana Venture, we’ve been get indoor growers. collect federal funding. chronicling many of the challenges rang- 18. Because everything about this in- 36. The Green Rush mentality that ing from legal to logistical for the past dustry (in a legal sense) is new, there has led to thousands of people attempt- year. This issue, we expanded that cover- are few established resources that would ing to enter the business all at the same age to address some of the flaws in Initia- be available to other businesses, such as time, some throwing massive sums of tive 502 and Washington’s contradictory lobbying groups, trade associations, uni- money around to ensure their success at marijuana laws and how they are having versity research, banking services, higher what many believe will eventually be a a direct impact on local businesses. These education, etc. multi-billion dollar enterprise. are the factors that other industries don’t 20. Likewise, many ancillary businesses 37. That same mentality has spawned have to take into consideration. While do- are relative start-ups, making it tougher to hundreds of support businesses looking to ing research for this story, I started compil- research a company’s history and reviews cash in. While most have great products ing a list of challenges unique to cannabis. from past clients. and good intentions, the potential money By no means is this a comprehensive list, 21. Strict marketing restrictions. No has definitely attracted an abundance of but I came up with 41 hurdles — in no par- other industry faces limitations on the size businesses that aren’t trustworthy. It can- ticular order — that prospective business of a sign hanging on the facade of a retail not be emphasized enough: Do your due owners should be aware of before diving outlet, or limits print advertising to indus- diligence. into the Green Rush. try publications. 38. Rules that are being written by peo- 1. Internal Revenue Code 280E. 22. The inherent risk of being first at ple that clearly don’t understand the can- 2. Marijuana remains a Schedule I con- anything. It fits with the phrase, “Pioneers nabis industry. trolled substance. get slaughtered, and settlers prosper.” 39. No consignments to retailers. 3. No third-party transportation. 23. No interstate commerce. 40. Armed guards or employees adds a 4. Most banks refuse to service the can- 24. Testing regulations that are, in many tremendous amount of risk of prosecution. nabis industry, even for businesses that are ways, more stringent than those in place 41. The lack of support from federal licensed by the state. for farmers and food manufacturers. programs and agencies such as the Envi- 5. Steep excise taxes rather than (or in 25. The possibility of federal prosecu- ronmental Protection Agency, the Unit- addition to) sales taxes that would be more tion for any number of crimes. ed States Department of Agriculture, the business friendly. 26. The uncertain future of being part of Food and Drug Administration and others. 6. Taxes, taxes, taxes. Aside from the an experiment that could be shut down by The list could go on and on, but even back-breaking excise taxes, business own- politicians or shifting public sentiment at this tip of the iceberg shows the immense ers have to deal with federal income tax, any moment. challenge ahead for those that choose to be sales tax, B&O tax, local taxes and more. 27. Increased importance on political daring. Washington and Alaska residents are lucky activism. If you’re in the tomato business, GARRETT RUDOLPH they don’t have to deal with state income no politician is ever going to be staunch- EDITOR

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