VENTURE

mjventure

MarijuanaVenture-Magazine-Issue3_7-227

ENERGY-SAVING TECHNOLOGY / OUT-OF-STATE INVESTING / IMPACT OF BIG AGRICULTURE

M A R I J U A N A

VENTURE

THE JOURNAL OF PROFESSIONAL CANNABIS GROWERS AND RETAILERS

THE SECRETS OF

CLEAR

Make 99% pure

THC distillate.

Find out how!

Soulshine

High-tech commercial bud

production with a purpose

ILLINOIS

obstacles

Wild medical cannabis

laws stifle industry

JULY 2016 $6.99

PLUS: ACCREDITED COLLEGE STARTS MEDICAL MARIJUANA TRAINING


NanoLux


Medicine Creek


Vessel Verde


Hydrologic


West Coast Horticulture


features

52

CLEAR ADVANTAGE

A look at the science and

technology behind the industry’s

most sought-after concentrates

60

TREE OF KNOWLEDGE

Tech innovators bring a

variety of new products to the

cannabis market

68

SOULSHINE

Washington-based

grower emphasizes more

than just profits

98

LINDA BOOKER

Q&A with the director of hemp

documentary Bringing it Home

ABOUT THE COVER: Soulshine Cannabis has established

a mission to not only produce top-shelf flower,

as shown on this month’s cover, but also to give

back to community nonprofits like Emerald City Pet

Rescue. Photo by Garrett Rudolph.

6 | Marijuana Venture // July 2016

MJVenture


VC999


contents

36 84

138

BASICS

24 | Calendar

30 | Market Watch

153 | P.O.V.

159 | Ad Directory

PROFILES

34 | Have a Heart

36 | SPARC

38 | Etain Health

SPOTLIGHTS

40 | ROAR

40 | Simplifya

40 | Thinner

42 | HighMax

42 | Procidic2

44 | Icarus Vi

44 | OG Chillum

INNOVATIONS

46 | AgHeat

48 | Harvestdate

84

ILLINOIS

Medical marijuana program

struggles with low patient count,

heavy regulations.

108

DAVID TRAN

Dope Media boss talks about

building a cannabis empire from

the ground up.

CULTIVATION

114 | The High Cost of Energy

124 | Traditional Agriculture

130 | Boutique Businesses

BEST PRACTICES

138 | Medical Marijuana Training

144

LEGAL PAGES

• Partnerships present a challenging

legal issue for business owners.

• A variety of financing options are

available for cannabusinesses.

• Does your business follow HIPAA

regulations? Should it?

OPINIONS

18 | Message from the Publisher

22 | Letter to the Editor

160 | Bud Scores

mission

Marijuana Venture’s goal is to provide the best information

possible to the legal, licensed, commercial marijuana business. Our

belief is that a great business publication will help professionals in

the industry create more efficient and profitable businesses.

8 | Marijuana Venture // July 2016


Walden Cannabis


Bios


Rough Brothers


Staff

Greg James

Publisher

Garrett Rudolph

Editor

Lisa Smith

Sales Manager

Aaron Greenreich

Account Executive

Greg founded Topics Entertainment

in 1990 and grew it to be the largest

privately held consumer software

company. After graduating from

Bellevue High School in 1975, he

enlisted in the Navy. He was honorably

discharged after serving from

1975 to 1979. He has four kids and

enjoys skiing, hiking, scuba diving,

sailing, biking and foreign travel.

Greg@MarijuanaVenture.com

After eight years as a newspaper

reporter, photographer and editor,

Garrett helped launch Marijuana

Venture in March 2014. He’s an

avid golfer, IPA drinker, sports fan,

workaholic with a deep love-hate

relationship with technology.

Editor@MarijuanaVenture.com

Lisa is a longtime advocate for

legal marijuana and feels fortunate

to be a part of the industry. She

especially enjoys working with and

getting to know our advertisers. If

you’re interested in getting your

message out and in front of this

new & evolving category, drop her

a line, we’re certain she can help

and would love to hear from you.

Lisa@MarijuanaVenture.com

Aaron joined Marijuana Venture after

years of sales account management

in the construction industry

and management in the music business.

He enjoys all things outdoors,

playing music and causing trouble

with his young sons.

Aaron@MarijuanaVenture.com

Patrick Wagner

Staff Writer

Chloé Mehring

Graphic Designer

Adam Wik

Account Executive

Lael Henterly

Staff Writer

Resident avocado enthusiast and

Street Fighter II champion, Patrick

graduated from the University

of Washington with a degree in

communications in 2014. When he

isn’t making snarky quips around

the office, he works on editing, researching,

writing and the concept

of compound modifiers.

Patrick@MarijuanaVenture.com

Chloé was born and raised in Wisconsin,

where she graduated from St.

Norbert College in Media Communications

and Graphic Design. In her

free time, Chloé enjoys photography,

woodworking, exploring the Pacific

Northwest and making incredible

grilled cheese sandwiches.

Adam has a passion for all things

outdoors, and has dedicated himself

to the cannabis industry since

2010, having worked in medical

dispensaries and retail shops. He

keeps his hands green by working

for a state-licensed cannabis farm.

His favorite color is green, and 2 is

his lucky number.

Adam@MarijuanaVenture.com

Lael is an award-winning journalist,

a licensed private investigator

and a University of Washington

graduate. As a journalist she

has written about crime, social

justice, culture and, most recently,

marijuana.

12 | Marijuana Venture // July 2016


Salient Systems


Expert contributors

Marijuana Venture seeks out well-respected experts in their fields to contribute

content and guidance for cannabis industry business owners and managers.

MICHELE BROOKE is an attorney in California who practices civil litigation and civil

cannabis law (www.brookelawgroup). She is a member of Americans for Safe Access, NORML

and the American Herbal Products Association.

HANAN B. KOLKO is a member of Meyer, Suozzi, English & Klein, P.C. He is co-chair

of the firm’s Cannabis Practice Group. He is also a member of the National Cannabis Bar

Association and its Amicus Committee, and has presented continuing legal education

programs on cannabis-related topics, including the ethics of representing cannabis clients,

employment issues in the cannabis industry, cannabis businesses and access to bankruptcy

courts, and how the interplay between federal and state laws impacts the cannabis industry.

LAUREN RUDICK represents investors and startup organizations in all aspects of

business and intellectual property law, specializing in cannabis, media and technology. Her

law firm, Hiller, PC, is a white-shoe boutique firm with a track record for success, handling

sophisticated legal matters that include business and corporate law.

WALTER STARK is the president of MSP Technology and a widely-recognized thought

leader in dehumidification solutions. He has more than 50 years of experience in the heating,

ventilating and air conditioning industry. During his career, he has won numerous awards,

including the ASHRAE Regional Award for An Energy Efficient Project and the New York

Governor’s Award of Energy Excellence. He was also featured in Popular Science magazine’s

“Best of What’s New.”

14 | Marijuana Venture // July 2016


Denver Consulting Group


Green Thumb


A MESSAGE FROM THE PUBLISHER

Opening up new markets

Milder cannabis is key to broad appeal

All the doom-andgloom

predictions

by the naysayers

when marijuana was

legalized turned out to

be about as accurate

as the now-infamous

Iraq WMD predictions

made by the Bush administration. In fact,

from what I’ve read lately, the rate of use

by teens has actually declined in Washington

and Colorado since both states legalized

marijuana. Maybe this is a simple

case of street-level psychology at work:

Make something taboo and teenagers will

want it. Make the product readily available

at local, well-lit pot shops where


minivan-driving, loafer-wearing,

50-something

dads shop, and

teens will start to see

it as about as cool as

shopping at Kmart.

That’s the funny

thing about legal

weed: It seems to be

stuck in a place that’s

still trying to be edgy

and counter-culture,

but also accessible

and friendly. Welcome

to 2016: Pot

culture meets American

capitalism head

on. While we’re probably still many years

away from Frito Lay-style end-caps and

promotions in retail stores, the inevitable

slide into widespread acceptance and

consumerism will undoubtedly result in

some big changes to the cannabis scene.

In a recent issue of The Atlantic, Mowgli

Holmes of Phylos Bioscience compared

the current varieties of cannabis

to moonshine, saying that “breeding has

been inward-looking, making products

for stoners. Normal people want to try it,

but can’t because they get too high. Legalization

should lead to options more

like wine or beer.”

I couldn’t agree more.

Last summer, after being told that

shade leaf couldn’t get you high, I decided

to see if it was true. To my surprise, a

I THINK

WE NEED

TO MOVE

BEYOND THE

POT CULTURE

EMPHASIS ON

POTENCY

couple of hits gave me the same kind of

light buzz I remember from the crummy

Mexican pot we got in the 1970s. Drawing

a parallel to booze, I’d say the effect

was comparable to a couple of Miller 64s.

That suited me fine since I had work to

do, and didn’t want to settle into a couch

for five hours of deep thought while listening

to Mike Oldfield’s Tubular Bells.

I would love to see a “lighter” section in

a retail store that caters to novices and

those who don’t want to get completely

baked on Green Crack. My guess is that a

light — or low-THC section of cannabis

— would be successful for all the same

reasons light beer or wine works now.

Most drinkers don’t want to get smashed

on 151 rum! To make

this happen, store

owners — who, from

my experience, are

typically regular users

themselves — would

have to hire non-users

or only occasional

users to interact with

the potentially huge

number of people

who don’t want the

pot culture version of

consumption.

Taking this line of

thinking further, you

have to wonder if it

would even make sense to start a magazine

called High Times today. Sure, it’s

been around forever and has published

a lot of great culture articles, but if you

drew another parallel to booze, High

Times would be called “Drunk Times.”

And the alcohol-based version of Cannabis

Cups would be contests to see who

could make the most potent bathtub gin

and get wasted the fastest.

I think we need to move beyond the

pot culture emphasis on potency, and

start thinking about marijuana in a more

consumer-friendly way. What we need

is a message that conveys “buzzed, not

baked,” and “simmered, not fried.”

GREG JAMES

PUBLISHER

PUBLISHER

GREG JAMES

Greg@MarijuanaVenture.com

EDITOR

GARRETT RUDOLPH

Editor@MarijuanaVenture.com

SALES MANAGER

LISA SMITH

Lisa@MarijuanaVenture.com

ACCOUNT EXECUTIVES

AARON GREENREICH

ADAM WIK

STAFF WRITERS

PATRICK WAGNER

LAEL HENTERLY

GRAPHIC DESIGNER

CHLOÉ MEHRING

Joy Beckerman

Michele Brooke

Rosalva Cleveland

David Hodes

Hanan B. Kolko

CONTRIBUTORS

R.W. Navis

Lauren Rudick

Walter Stark

Sue Vorenberg

MARIJUANA VENTURE VOL. 3, ISSUE 7

Marijuana Venture (ISSN #2376-0710) is published monthly

by MJ Directions LLC. PO Box 1419, Renton, WA, 98057.

Phone: (425)656-3621. Website: www.marijuanaventure.

com. Copyright 2016 by Marijuana Venture. All rights reserved.

Reprinting, in whole or in part, is expressly forbidden

without written permission from the publisher.

ADVERTISING

For advertising rates, call (425)656-3621 or email Greg@

MarijuanaVenture.com.

SUBSCRIPTION SERVICES

For subscription services, please call (425)656-3621, visit www.

marijuanaventure.com or email Editor@MarijuanaVenture.

com. For change of address, please include the old address and

new address, along with an address label from a recent issue,

if possible. Please allow up to three weeks for address to be

changed. If an address is not updated when the magazine is

mailed, we are not responsible for delivery of your magazine. If

the Post Office alerts us that your magazine is undeliverable, we

will suspend our subscription until a correct address is received.

Marijuana Venture assumes no responsibility for any claims

or representations contained in the magazine or in any advertisement.

All materials contained are for educational purposes

and intended for the legal marijuana business where allowed

by state law. Marijuana Venture does not encourage the illegal

use of any of the products contained within.

18 | Marijuana Venture // July 2016


KES Science


Cannaline


LETTER

to the EDITOR

Dear editor:

As fire chief of Red

Creek Volunteer Fire &

Rescue, I was disappointed

by the way your authors portrayed our

department. I would like to offer another

perspective on how cultivation businesses

are affecting our community and how

Colorado Leaf has subjectively misrepresented

our fire department’s actions.

When these commercial cultivation

businesses first began construction a

year and a half ago, they did not inquire

about the capabilities of our small volunteer

department or research the local insurance

regulations (just as they did not

perform due diligence in regards to water

and power restrictions). The letter I circulated

to Colorado Leaf and the other

licensed grows in our area was prompted

by questions posed by their respective insurance

companies. From the questions I

was fielding, I knew our department was

being misrepresented in regards to our

structure fire capabilities. We have no

structure engines capable of consistently

accessing these rural properties, limited

structure training, no breathing apparatus

and aging structure gear. Our department

is a wildland fire department and we fight

wildland fire.

We have, on several occasions, attempted

to discuss our limitations with the local

cultivators, to no avail.

Members of my department, myself

included, have personally reached out

to these new residents to invite them to

meetings, fundraisers and trainings, including

Mr. Sprau of Colorado Leaf. We

were assured of their attendance and support

at these meetings. We did not receive

the courtesy of an appearance. Several

months later, we hand-delivered a letter

to each cultivator announcing a special

22 | Marijuana Venture // July 2016

meeting for the growers to explain what

we can and cannot do as a fire department.

We had agendas prepared, introductions

planned and our volunteer members present

for a meet and greet, and none of the

cultivators showed up.

Our department has made many efforts

to communicate with all of the new

grows, but we have been ignored by all

but a handful of these farms. A few of the

smaller businesses have helped us with

training areas, volunteers and events, but

only one individual representing the cannabis

industry has made a significant donation

to our department. The bulk of that

donation was put toward a fund to replace

one of our fire trucks for the community's

benefit.

In response to the charge of being “held

for ransom,” Mr. Sprau should reread the

letter I sent to all of the cultivators. In

November, there were 16 licensed grows

in our area (now 22). I had proposed the

growers come together and divide the

total cost of upgrading our department

($172,000), for a contribution of $10,750

each. That is a big difference, and hardly

an unfair price for moving a commercial

enterprise into a fire district that was designed

for ranchlands.

In the 20-plus years that I have been a

student of firefighting, I am always surprised

how people become experts on

how structures burn, when they are the

one that built it. If any of the cultivators

had bothered to attend the meetings we

hosted, we would have explained how

real firefighting works, and not the fantasy

they see on TV. There are no “arbitrary

targets” here. The cannabis industry is the

only one sporting 100,000-square-foot

facilities in this area, and it doesn’t matter

what they grow. Soybeans, Christmas

trees or cannabis, they all present serious

challenges to our department when the

buildings are of large size.

In regards to their impact on the community,

when a multimillion-dollar business

moves into a pre-existing fire department's

coverage area and their only

contribution to the community is a water

hookup, yes, that can cause tension. This

area has always been sparsely populated

with only 217 homes stretched over

a 107-square-mile coverage area. Our

community has supported us for 20 years

on donations alone with no tax income

of any kind. They support us not only to

lower their own insurance rates, but for

the service we provide. The neighbors

surrounding your businesses donate money,

time, baked goods for fundraisers,

labor to wash fire trucks, skills to repair

our aging equipment, and all manner of

support … what has the cannabis industry

done?

It seems the cannabis industry is far

more interested in “bottom lines” than

good relations with their neighbors. The

bottom line from the fire chief’s chair

is very simple: I will not risk the lives

of my volunteers by sending them into

a building for which they do not have

the proper equipment and training. We

asked for their help to obtain those

things, and they ignored us. What would

you have us do?

If this is the level of community responsibility

and generosity that your industry

represents, I feel sorry for you. People

move out to these rural locations to have

neighbors they can rely on, but what have

you offered to any of these residents besides

broken promises and bright lights?

JOE DYJAK

FIRE CHIEF

RED CREEK VOLUNTEER FIRE & RESCUE


Plant Success


CANNABIS CALENDAR

The Tacoma Dome hosts numerous

business events, like the Imperious

Expo, due to its convenient location

and accommodating amenities.

MORE EVENTS

July 9-10: The National College of

Natural Medicine (NCNM) will be hosting

the Medical Marijuana Conference

on July 9-10 at the NCNM campus in

Portland, Oregon. The event will focus

primarily on educating health care professionals

about the medical uses and

properties of cannabis. The two-day

conference will feature several leading

clinicians and experts on topics like the

history, components and botanical agents

of cannabis. The conference is open to

the public with discounts for medical

students, NCNM alumni, physicians and

health care providers.

More information: career-alumni.

ncnm.edu.

July 9-12: AmericanHort presents

Cultivate‘16 at the Greater Columbus

Convention Center in Columbus, Ohio on

July 9-12. The all-industry horticultural

trade show will host more than 120 educational

sessions throughout the four-day

event. The eight-acre show floor will be

home to various networking opportunities,

product announcements and vendors

from across the country.

More information: cultivate16.org.

'Braised and Confused'

launches at trade show

TACOMA, Wash. — Bringing together

30 cannabis industry speakers and more

than 100 exhibitors, the Imperious Cannabis

Business Expo will kick off its

inaugural two-day, business-to-business

trade event at the Tacoma Dome in Tacoma,

Washington on July 20-21.

Tickets start at $99 for single-day access

to all speakers and exhibits.

VIP passes include full access for both

days and a special dinner by “The Herbal

Chef” Christopher Sayegh, who will be

filming the pilot for his Apple TV reality

show, Braised and Confused.

Attendees can expect a broad range of

speakers and vendors at the show.

“From licensing and celebrity branding,

all the way to legal advice from lawyers

like Aaron Pelley,” show organizer

Eric Norton said. “It’s not just going to

be about lighting or outdoor grows — it’s

going to be about everything.”

Norton is no stranger to hosting B2B

events; he produces five shows a year for

the oil industry, and now he’s taken his

experience into the cannabis space.

“I had a big paradigm shift, personally,

because being from Texas there were all

the negative stereotypes against cannabis,”

he said.

Norton plans to turn the show into an

annual event with a focus on recreational

states, and hopes to expand into Arizona

and Texas.

More information: www.imperiousexpo.com.

July 16: Alaska Genetics and the

Alaska Small Cultivators Association

are holding Canna Fair 2016 on July

15, at the Land’s End Resort in Homer,

Alaska. The show features a variety of

guest speakers and employment services,

panel discussions, educational opportunities,

raffles and free gifts. Although public

consumption is illegal, attendees can

bring up to one ounce of cannabis to gift

or display to other show-goers.

Admission is $10. Attendees must be

21 or older. Sponsorships and vendor opportunities

are available.

More Information: www.aksmallcultivators.org/canna-fair-2016.html.

July 23-24: Maximum Yield will host the

2016 San Francisco Indoor Gardening

Expo at Pier 48 in San Francisco on July

23-24. The first day of the show is reserved

for industry professionals only, and the following

day is open to the public. The twoday

event will kick off Saturday with a VIP

seminar and expert panel discussion. Both

days feature an open vendor floor where exhibitors

and attendees can network.

More information: www.indoorgardenexpo.com/san-francisco.

24 | Marijuana Venture // July 2016


BOLD Light

Deprivation


CANNABIS CALENDAR

July 27-29: The Latin American

Medical Cannabis Conference, part of

the PROMED series, takes place July 27-

29 at the Crowne Plaza Hotel in San Jose,

Costa Rica. The educational event will

cover the fast-growing medical cannabis

industry in Latin America. With Costa

Rico, Mexico, Peru, and Argentina all

having medical cannabis legislation in the

works and recent legislation in Colombia

and Uruguay, the conference’s goal is to

promote understanding of the new medical

markets and ensure that quality legislation

is passed in Latin America and the

U.S. this fall.

More information: latinamericanmedicalcannabis.com.

July 30: The team at MJ Conferences

is launching the National Cannabis

Tour with its first stop on July 30, in Hollywood,

California. Bucking the cannabis

conference trends of high costs, stiff

competition and minimal ROI, the tour

is focused on providing education and

networking opportunities for licensees,

applicants, investors and policy makers

without the significant financial barriers

to entry. Tickets are available now.

More information: nationalcannabis.

com.

August 6-7: The Indo Expo Trade

Show is opening on Aug. 6-7 at the Portland

Expo Center in Portland, Oregon.

The two-day expo opens exclusively to

industry professionals on Saturday, Aug.

6 and opens to the public the following

day. The show will host 250 exhibitors,

25 of which cater to international markets,

and more than 20 speakers providing

seminars and educational forums. A

career fair is being held on the second

day. Complimentary passes are being provided

to trade and industry professionals.

Tickets are available now.

More information: indoexpo.com.

August 6-7: Leaf Brand and Weedmaps

present the San Diego Cannabis

Conference and Expo on Aug. 6-7 at

the San Diego Convention Center. The

show features seminars from the Gridiron

Cannabis Coalition, panels on current

state and federal laws, and a panel

featuring female industry leaders.

The show will be home to 150 exhibitors,

educational workshops and business-to-business

networking forums.

Tickets are available now.

More information: socalccexpo.com.

August 19-21: Seattle Hempfest celebrates

its 25th anniversary Aug. 19-21.

The event spans three of Seattle’s waterfront

parks: Centennial Park, Myrtle

Edwards Park and the Olympic Sculpture

Park. The show continues to focus on

cannabis culture, politics and activism.

Attendance for the show has averaged

around 100,000 visitors in the past few

years. The 2016 speaker and performer

lineup will be announced soon. Admission

is free, and sponsorships and vendor

opportunities are available.

More information: www.hempfest.org.

September 7-9: The Cannabis World

Congress & Business Exposition will be

at the Los Angeles Convention Center on

Sept. 7-9.

ZMS Financial

26 | Marijuana Venture // July 2016


Centurion Pro


CANNABIS CALENDAR

The fall event features a similar lineup

as its East Coast counterpart with a focus

on industry professionals, lawmakers

and entrepreneurs. While the show floor

opens Sept. 8-9, the educational track begins

Sept. 7. A variety of guest speakers

have yet to be announced.

More information: www.cwcbexpo.com.

October 5-6: Canncon, a scientific

organization dedicated exclusively to

cannabis testing and research, hosts a

conference in Portland, Oregon on Oct.

5-6. Not to be confused with the trade

show of a similar name in Seattle, this

two-day conference will bring testing

experts together with attendees who are

looking to learn more about testing processes,

cannabis science and research.

Topics will include sample preparation,

chromatography, mass spectrometry, terpene

profiling, contamination analysis

(pesticides, residual solvents, microorganisms

and heavy metals), genetics/

genomics, regulations, legalization, scientific

methods/standards and medicinal

cannabis. A venue for the event has yet

to be announced. Registration is available

online now.

More information: www.canncon.org.

October 13-14: The International

Cannabis Business Conference continues

its global event tour in Vancouver,

British Columbia, on Oct. 13-14 at the

Hyatt Regency. The event brings attendees

the latest information in business,

culture, advocacy and politics. The show

is different than other expos, because organizers

limit the number and types of

vendors allowed on the show floor. This

ensures a greater variety of vendors and

gives attendees plenty of time to see the

seminars. Tickets are available now.

More information: internationalcbc.com.

November 16-18: The Marijuana

Business Conference and Expo will hit

Las Vegas for a three-day, business-only

event that is expected to have thousands

of attendees, several hundred vendors and

some of the most well-renowned speakers

in the cannabis industry, including

dispensary owners, private equity leaders

and top lawyers. The show will be hosted

at the Rio Hotel & Casino in Las Vegas.

The general public is not invited to

Marijuana Business Conferences.

More information: mjbizconference.com.

January 28-29, 2017: The Hawaii

Cannabis Expo will hold its second

event on Jan. 28-29, 2017 at the Neal

S. Blaisdell Exhibition Hall in Honolulu,

Hawaii. This event is expected to be

similar to the 2016 show, which offered

attendees free education seminars, panel

discussions and keynote presentations

by industry leaders. Classes covering

growing, budtending, strain selection

and advanced cultivation tips were available

for a fee. Although the 2017 show

has yet to announce its official schedule,

tickets and sponsorship opportunities are

available now.

More information: hawaiicannabisexpo.com.

To submit an event for inclusion in the

Marijuana Venture calendar, email Editor@MarijuanaVenture.com.

Campbell Nelson

28 | Marijuana Venture // July 2016


Imperious

Cannabis

Business Expo


MARKET WATCH

A look at business metrics from the legal cannabis market, with information

provided by FrontRunnerData.com and CannabisBenchmarks.com

National spot pricing by grow type

Indoor U.S. Spot Price

27%

$0 - $1,500

47%

12%

$1,501 - $2,000

$2,001 - $2,500

6%

8%

$2,501 - $3,000

$3,001 - $5,500

Source: Cannabis Benchmarks

Outdoor U.S. Spot Price

Greenhouse U.S. Spot Price

45%

17%

17%

55%

14%

33%

3% 4%

8%

7%

POWERED BY

30 | Marijuana Venture // July 2016


CCTV


MARKET WATCH

Sales percentage by day of the week

18%

16%

14%

12%

10%

8%

6%

4%

2%

12.0%

11.0%

14.2%

15.0%

13.3%

17.0%

16.5%

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Sales percentage by product category

Flower

75.1%

11.0%

13.6%

Concentrates

Edibles

Topicals

Percentages based on sales

figures from Washington's

licensed marijuana retail

stores for the month of May.

0.3% Source: Front Runner

32 | Marijuana Venture // July 2016


Crimson Insurance


BUSINESS PROFILES

Green lights and

glass displays fill

the Have a Heart

Skyway location,

one of the chain’s

five retail stores

in Washington.

Have a Heart

Newest store should be a tourist hotspot

By Lael Henterly

SEATTLE — Ryan Kunkel was working

as a blackjack dealer in a shady card

room, before making the life-changing

decision to open the first Have a Heart

medical dispensary in 2011. By the time

Washington voters legalized recreational

marijuana in 2012, Kunkel was operating

six dispensaries.

As Washington moved toward legalization,

Kunkel began collecting taxes

on the medical marijuana he sold, having

heard that Colorado favored tax-paying

businesses when it began issuing recreational

marijuana licenses under Amendment

64.

In the medical market, Kunkel made

enough money to dive seamlessly into

Washington’s retail market without any

funding from outside investors, but

missed out on the initial license lottery.

After scouring the state for a license,

he finally managed to open a marijuana

retail store in Ocean Shores. Now, he’s

about to open a store in Seattle’s Belltown

neighborhood. It will be the fifth

34 | Marijuana Venture // July 2016

rec shop in the Have a Heart family, in

addition to Seattle stores in Greenwood,

Skyway and Fremont.

Have a Heart Belltown is possibly the

most centrally-located shop in Seattle.

Situated in the cavernous space that once

housed the nightclub See Sound Lounge,

the retail store has an enviable amount

of floor space. Seattle’s downtown area

doesn’t have any cannabis shops, so the

proximity to tourist destinations bodes

well for Kunkel’s new location.

Have a Heart Belltown

is less like a

retail store and more

like an immersive

cannabis culture experience.

The space

has a candy-colored

mural, and various

props include a seven-foot-long

joint that

glows red on one end.

The latest Have a

Heart location almost

Company: Have a Heart

Locations: Ocean Shores

and Seattle (Belltown,

Fremont, Greenwood and

Skyway)

Owner: Ryan Kunkel

Operations: Five

Washington retail stores

didn’t open due to changes to Seattle’s

zoning laws. When Kunkel bought out

the nightclub that occupied the space, it

was far enough away from any restricted

entities, such as schools and parks,

which require a 1,000-foot buffer according

to state law.

However, the City Council reduced

buffer zones to 250 feet in Belltown,

making Kunkel’s shop too close to a

neighboring dog park. He petitioned the

council and the rule was ultimately adjusted,

allowing him to open.

“We had to do some crafty work,” Kunkel

said. “The City Council wanted to allow

it, but the dog park was prohibiting it.”

Although Kunkel has successfully

opened several rec

shops, it hasn’t been

without hurdles, including

letting go of

80% of his work force

while transitioning

from medical to recreational.

All Have a

Heart locations will

continue to serve both

recreational customers

and medical patients.


Clear Choice


BUSINESS PROFILES

SPARC stands

out as a highwater

mark in

dispensary design

SPARC

High concept design comes to life in San Francisco

By Patrick Wagner

SAN FRANCISCO — Located at the

corner of Laskie and Mission streets in San

Francisco, SPARC represents an important

milestone for both the cannabis industry

and the roughly 800 patients who visit the

medical dispensary on a daily basis.

Erich Pearson opened the above-board

dispensary in 2010 with permission from

San Francisco city officials. Being the

first to cultivate and sell medical cannabis

with permits from the city inadvertently

made Pearson an ambassador for the entire

industry. It was a role the entrepreneur

and activist took into account while

designing the facility.

“I wanted it to be professional,” he said.

“I wanted it to be a place where I could

bring regulators and government officials,

and also a place where a person of any

economic class or social status could come

through and be comfortable.”

Pearson, like many dispensary owners,

36 | Marijuana Venture // July 2016

aimed to normalize the cannabis industry

in the eyes of lawmakers. But describing

SPARC merely as “comfortable” might

be a little understated. From the outside,

the dispensary looks perfectly at home in

one of the most tech-driven cities in the

world. Its neon sign hangs above the De

Stijl-inspired blue and off-white windows

running along the sidewalk, which leads to

SPARC’s front door.

Inside, the design

morphs into something

else entirely,

with stylish elements

such as a multi-tiered

ceiling and hidden

blue lights that stretch

the length of the dispensary

and connect

with the wood and

concrete walls. A neon-lit

bench lines one

Company: SPARC

Location: San Francisco,

California

Owner: Erich Pearson

Employees: 150

Operations: Dispensary

and three indoor cultivation

indoor facilities

wall of the dispensary. Vaporizers sit on

each table, and at the opposite end of the

sales floor, glass cases display flowers, edibles

and concentrates.

“Professionalizing it was really the

driving force,” Pearson said. “We’ve certainly

seen a lot of folks motivated by

what we did five years ago. We’ve seen a

lot of amazing dispensaries come online

since. We’ve put together a great space,

but I’ve never considered myself to be a

role model.”

Role model or not, Pearson definitely

helped usher in the modern era of dispensary

design. But what

will the company do

for an encore?

Pearson is planning

to open another

SPARC dispensary

in the Lower Haight

neighborhood of San

Francisco, which, if

history is an indicator,

will be another milestone

in the cannabis

industry.


Root Sciences


BUSINESS PROFILES

The design of all four

Etain locations match

the color palette of the

company logo and the

professional atmosphere

of a physician’s office.

Etain Health

Family-run business stakes an altruistic claim in New York

By Patrick Wagner

ALBANY, N.Y. — Etain Health is

ready to run, but New York wants it to

crawl. One of the five companies licensed

to produce and sell medical marijuana in

the Empire State, Etain has dispensaries

in Albany, Kingston, Syracuse and Yonkers,

as well as a 22,000-square-foot cultivation

and manufacturing facility capable

of serving 20,000 patients.

Inside the four dispensaries, patients

meet with licensed pharmacists behind

the red and black counter. The dispensaries

look and operate like doctor’s offices.

“There is a lot more skepticism in the

Northeast of whether or not this is a credible

medicine,” chief operating officer Hillary

Peckham said. “It’s not just a group

of friends that are trying to grow weed.

It’s people who’re trying to produce a

medicine for good reasons.”

Peckham said the company has taken a

different approach than most of the other

state-licensed organizations in New York. Although

the company operates as a for-profit

38 | Marijuana Venture // July 2016

business, many of Etain’s goals seem to

mirror those of a traditional non-profit.

“We’re very community-focused,” she

said. “We’re just trying to do the right

thing.”

Etain Health makes numerous efforts to

enhance the communities where it operates,

including hiring local part-time employees

for its harvest

program. The company

also has a program

specifically for helping

women who had

previously retired or

left jobs to be stay-athome

moms return to

the workforce.

“It’s part of our

whole vision with

Etain to promote

Company: Etain Health

Locations: Albany,

Syracuse, Kingston and

Yonkers, New York

Owner: Peckham family

Employees: 30

Operations: Four

dispensaries,

22,000-squarefoot

cultivation and

manufacturing facility

women,” Peckham

said. “Any sort of direction

we can take to

support that and remain

good community partners is essential

for this industry.”

Promoting women in the industry

makes sense, considering women play

such a significant role within Etain. Hillary

Peckham’s sister, Keeley Peckham,

is the chief horticulture officer, while

their mother, Amy Peckham, is the company’s

CEO.

“This is a huge victory for us, for women-owned

and family-owned businesses,

and for New York State!” the company

posted on social media after receiving its

license.

Etain’s patient count

continues to climb

slowly, as New York’s

program has expanded

from just 51 patients

in January to nearly

4,000 in May.

Although the company’s

reach is limited

at the moment,

Peckham said she is

optimistic about the

steps the Department

of Health has taken to

expand the program.


Crew Consulting


PRODUCT SPOTLIGHT

ROAR

Guardian Data Systems has developed

an enterprise resource planning (ERP)

platform specifically for the fast-growing

cannabis industry.

The ROAR software is designed to help

growers, processors and retailers track all

aspects of their operation. (ROAR stands

for Resource Optimization, Accounting

and Reporting.) Among other capabilities,

the software helps growers manage traceability

requirements, test results, nutrient

usage and energy consumption, while

retailers can manage inventory, review

business information through interactive

dashboards and forecast product demand.

“We’ve taken a mature, established ERP

platform and tailored it to the cannabis industry,”

Guardian CEO Lance Ott said. “We

have created a solution that alleviates

business management pain for cultivators,

processors and retailers in one of the nation’s

fastest-growing industries.”

ROAR’s mobile platform is compatible

with computers, tablets and smart

phones, giving stakeholders the flexibility

needed to keep pace with business.

“This is a global ERP system tailored to

all parts of the industry,” Ott said. “It enables

cannabis-based suppliers, producers

and service providers

to focus on

revenue-generating

activities, rather

than running a

business.”

More information:

guardiandatasystems.com.

Simplifya

Two of the nation’s

leading cannabis law

firms — Denver-based

Vicente Sederberg LLC

and California-based Greenbridge Corporate Counsel — are pairing up with

tech entrepreneur Marion Mariathasan to develop compliance software

called Simplifya.

Simplifya is software as a service (SaaS) that will assist cannabis businesses,

law firms, consultants, financial institutions and regulatory agencies

with monitoring licensee operations for compliance with state and local

regulations. The software is backed by the knowledge and expertise of

attorneys, such as Kelly Rosenberg, who served as counsel to the Colorado

Marijuana Enforcement Division for many years.

With a unique combination of legal expertise and software development

experience, Simplifya is producing an easy-to-use app for web, mobile and

tablet platforms.

“Simplifya aligns with Vicente Sederberg’s philosophy of advancing the

cannabis movement as we provide value to our cannabis industry clients,”

said Brian Vicente, Vicente Sederberg partner and Simplifya co-founder.

“By simplifying legal and regulatory compliance, we will enable clients to

achieve excellence in the market.”

Simplifya will launch for the Colorado market in July and will continue the

rollout to other markets soon thereafter.

More information: www.simplifya.com.

Thinner

Farm to Vape now offers

one-gallon bottles of Thinner,

a mixing agent used to break

down concentrates and essential

oils into a stable liquid for

all vaporizers.

The Virginia-based company

does not manufacture Thinner

specifically for cannabis, but

says on its website that Washington

and Colorado customers

“swear that this is the best

possible solution to thin their

extracts and waxes for their

vape pens/wicking vaporizers.”

The one-gallon bottles of

Thinner have been designed

with commercial enterprises

in mind, allowing concentrate

makers to focus on manufacturing

the best products

for their consumers. Farm to

Vape’s manufacturing facility is

ISO9001:2008 certified.

Wholesale, distribution and

licensing opportunities are

available.

More information: www.

farmtovape.com.

40 | Marijuana Venture // July 2016


Clarity Farms


PRODUCT SPOTLIGHT

Procidic2

Urban-gro is the sole U.S. distributor of Procidic2,

a fungicide and bactericide that is labeled

specifically for use on cannabis crops.

“Growers are grappling with the issue of protecting

their plants while still remaining compliant

with the industry’s fluctuating regulatory

landscape,” said John Chandler, Urban-gro’s

vice president of cultivation technologies.

“Procidic2 is the first cannabis-labeled and

legally approved pesticide product to protect

growers’ harvests and fight against common

fungi, specifically powdery mildew.”

According to Urban-gro, Procidic2 is labeled

and cleared for use on cannabis in Alaska, California,

Colorado, Connecticut, Delaware, Hawaii,

Illinois, Maine, Massachusetts, Michigan, Minnesota,

Montana, Nevada, New Jersey, New York,

Rhode Island, Vermont and Washington, with

Maryland, New Hampshire, Oregon and Washington,

D.C. nearing approval. The manufacturer

has begun the approval process with the Arizona

and New Mexico departments of agriculture.

The organic acids in Procidic2 fall under the classification

of GRAS (generally recognized as safe).

Urban-gro has formed an exclusive partnership

with Biobest, a Belgian-based global

leader in biological control of pests. Biobest’s

organic bio-control solutions help cultivators

grow a successful organic crop.

More information: urban-gro.com.

HighMax

MaxLite has introduced its HighMax line of horticultural lamps

as energy-efficient replacements for 400-watt metal halide and

high-pressure sodium fixtures.

HighMax lights are designed to help plants germinate, develop

and flower by concentrating radiation in order to stimulate photosynthesis.

The 200-watt compact fluorescent lamps are offered

in two color temperatures (6500K and 2200K). The grow lights

are built to efficiently manage heat over a lifetime of 10,000

hours. The lamp body is vented with patented air gaps that increase

airflow.

“MaxLite continues to be on the forefront of energy-efficient

technologies, including with traditional light sources,” product

manager Alex Truong said. “Our new HighMax lamps are specifically

designed to provide growers with the ideal lighting conditions

to improve the yield, quality and speed-to-market of their

indoor crops.”

MaxLite bulbs fit common mogul (E39) base fixtures and are

less than 14 inches long.

More information: www.maxlite.com.

42 | Marijuana Venture // July 2016


Zoom


PRODUCT SPOTLIGHT

Icarus Vi

BIOS Lighting has introduced the new

Icarus Vi low-profile LED grow lights designed

specifically for vertical farming

applications.

According to the company, BIOS LED

fixtures deliver up to 70% greater PAR

photon efficacy and 50% more system

efficiency than 1.000-watt high-intensity

discharge lights. Icarus Vi LEDs are

just 1.5 inches tall and can be mounted

in smaller spaces than many similar fixtures

for more uniform PAR levels over

wide areas and multiple layers of production.

Icarus Vi fixtures include an optional

remote powering system based on

VoltServer’s Digital Electricity, meaning

they can be powered from a nearby climate-controlled

server room using optical

fiber cables. This approach can significantly

reduce equipment and labor

costs, and slash energy costs associated

with expansive air conditioning by lowering

grow facility temperatures.

“It is time to bring commercial crop

production out of the ‘purple haze’ and

into the white light, as BIOS broad white

spectrum delivers the highest PAR photon

efficiency along with clear cost benefits,”

said Sean Tegart, president and CEO

of BIOS. “Two-thirds of LED grow light

fixtures on the market use purple light,

which have no benefit above broad spectrum

light for plant growth and are far

less effective for visual crop assessment.”

More information: bioslighting.com.

OG Chillum Starter Kit

While many consumers take a certain

amount of pride in owning custom-made

glass pieces, there are just

as many who prefer simpler smoking

pieces.

The OG Chillum display case is an innovative

new way for cannabis retail

stores and head shops to sell simple

glass pipes.

The starter kit includes 100 four-inch

OG Chillum pipes, as well as a heavy-duty

acrylic display case, making it easy

for retailers to sell and replenish these

popular products.

The display case is five inches wide

and 11.5 inches deep, while standing

less than seven inches tall. Each display

case features a simple dispensing

mechanism for customers to remove

one pipe at a time. Retailers generally

price the pipes between $5-7. The OG

Chillum is manufactured in the United

States.

Custom printing is available.

More information: www.ogchillum.

com.

44 | Marijuana Venture // July 2016


Interra Oils


INNOVATIONS

AGHEAT

Outdoor cannabis growers in Washington, Oregon and Colorado

haven’t had to cope with an early autumn freeze — yet.

When one does hit, the losses could be catastrophic.

Fruit growers know the drill; they’ve experienced significant

crop losses due to frost. Growers protect large apple orchards

from frost and freeze using elaborate — and expensive — systems

featuring huge fans and diesel heaters that produce black

smoke. Unfortunately, the cost to install one of these wind machine

system is prohibitive for many smaller operations.

Luckily, there’s a more affordable and less fuel-intensive

system that is perfectly suited to marijuana farms. AgHeat

heaters offer growers an affordable alternative to the standard

diesel smudge pots.

The small heaters are plumbed together and fueled by propane

that circulates through underground piping or surface

hoses. Warm air rises from the pyramid-shaped heaters on cold

nights, protecting the plants from frost damage. The AgHeat

system works well as a defense against both frost and freezing

temperatures. When Oregon State University researchers tested

the propane heaters in 2006, the units outperformed both

shell casing heaters and diesel smudge pot heaters, lifting the

temperature 6-7 degrees up to 16 feet off the ground.

The AgHeat units work well by themselves, but they can also

be used in conjunction with a fan system to circulate the rising

warm air. Without fans, 30 to 40 heaters are needed to protect

a one-acre grow.

AgHeat heaters are easier on the environment than similar

products, too. The OSU study found that diesel smudge pots released

as much as four times more smoke than propane heaters.

The system isn’t cheap to install, but it’s more affordable than

its competitors and will pay for itself the first time it saves a crop.

More information: www.agheat.com.

46 | Marijuana Venture // July 2016


GreenBroz


INNOVATIONS

HARVESTDATE

When Saagar Varu was approached about building a website

for a state-licensed cannabis producer, he began looking deeper

into the inner workings of Washington’s recreational marijuana

market.

He realized the challenges of a system with more than 700

licensed producers and less than 300 currently licensed retail

outlets.

When growers send an email to a retail buyer, it’s likely that

dozens of competitors have already done the same thing. Dropping

off samples might yield a better response rate, but retailers

are inundated with growers who stop by without appointments.

All too often, those samples are forgotten or ignored, meaning

wasted time and money for both parties.

Varu launched Harvestdate as a simple web-based solution to

connecting buyers and sellers through one easy-to-use site.

“A lot of growers know how to grow really well, but they

don’t know how or where to sell their products,” said Varu, the

company’s co-founder and lead developer.

The site allows licensed producers and processors to list their

available products. Each post can include logos, contact information,

product photos, strain information, quantity available

and, perhaps most importantly, laboratory test results.

“It’s the next best thing to a sample,” Varu said.

Varu focused on making the site user friendly. It had to be

something people could figure out how to use in a matter of

minutes, he said. Businesses can post products and manage their

listings quickly and easily. Potential buyers can sort products by

brand, strain, potency or distance, allowing them to find exactly

what they need.

Harvestdate is currently free to all state-licensed cannabis

businesses. Varu said he wanted to build a platform that could

help cannabis companies operate more efficiently, rather than

burdening them with a subscription fee or another monthly bill.

The site can be particularly valuable for processors, who are

constantly looking for enough raw materials to keep their machines

running and a steady supply of edibles and concentrates

on retail shelves.

More information: www.harvestdate.com.

48 | Marijuana Venture // July 2016


Dear Electric


Growth by Design


KNOWLEDGE

–––––––– is ––––––––

POWER

Front Runner

Front Runner is Washington’s premier i502 business

intelligence website for recreational marijuana data

“You can’t afford NOT to have this information”

www.frontrunnerdata.com


52 | Marijuana Venture // July 2016

CoolJarz


A ‘CLEAR’

ADVANTAGE

Equipment used to make THC distillate is now available

for commercial cannabis processors

― ― ―

By GREG JAMES

Those paying attention to the rapidly evolving legal

marijuana industry are familiar with the “me

too” culture that follows the latest innovations.

New products are often hyped to death until

something else comes along to distract the predictable

hordes and repeat the pattern.

Often, the cause of the clamor is little

more than a new name or small evolution

in the industry. Rarely does anything

amount to a sea change.

However, the emergence of commercially

available equipment to make “The

Clear” — also known as golden distillate

or clear distillate — represents a poten-

www.marijuanaventure.com | 53


tial game-changer in the business, and a

big leap forward in both technology and

possible applications. For the purpose of

this article, we will refer to the product

created as THC distillate.

THC distillate is an odorless, tasteless

liquid created by refining hash oil — the

thick, viscous product that is extracted

from cannabis through CO2 or hydrocarbon

extraction or alcohol reduction.

In its most common forms, hash oil contains

THC concentrations in the 50-70%

range.

Different methods and skill levels of

hash oil producers result in a finished

product that can vary greatly from one

batch to the next.

THC distillate, on the other hand, is

made through a process called molecular

distillation. Molecular distillation

has been around for decades, and is most

commonly used to separate various products

from crude oil. Gasoline, diesel fuel,

acetone, liquefied petroleum gas (LPG)

and many other products made from petroleum

are created using molecular distillation.

The process involves vacuum

distillation below the pressure of 0.01

torr. It is the separation, purification and

concentration of natural products’ complex

and thermally sensitive molecules.

Molecular distillation is characterized

by short-term exposure of the base liquid

to high temperatures by high-volume

pressure (around 1,024 millimeters of

mercury) in the distillation column and

a small distance between the evaporator

and the condenser, where fluids are in the

free molecular flow regime (the mean

free path of molecules is comparable to

the size of the equipment). In short, molecular

distillation creates pure extracts

that are stripped of any contaminants. In

the food industry, for example, fish oil is

purified to eliminate heavy metals using

molecular distillation.

It’s essentially the same process used

in the creation of spirits, says Hamilton

Foro, chief scientist at Root Sciences, the

exclusive North American distributor of

VTA molecular distillation equipment.

“With heat and pressure, you target

the molecules that are desired,” Foro

says. “In the same fashion that you

would distill vodka from mash, you can

distill pure cannabinoids from its crude

oil, leaving the undesirables behind.”

54 | Marijuana Venture // July 2016


Nenad Yashruti (left)

and Cory Balma

stand in front of Root

Sciences’ molecular

distillation equipment.

www.marijuanaventure.com | 55


High-tech

processing

equipment

manufactured

by Helderpad

utilizes shortpath

distillation

to refine extracts

into THC distillate.

The same process that has worked in the

petroleum and food industries for decades is

now being utilized in the cannabis industry

to create THC distillate. Molecular distillation

is a further refinement of hash oil that

strips the raw product of impurities and terpenes,

resulting in a pure, potent, highly refined

and much more versatile end product.

THC distillate can be up to 99% THC.

Up until now, THC distillate has been

something of a mystery. Created only by a

few companies that had the equipment and

know-how to make it, most producers and

growers have had to outsource production of

THC distillate. With the equipment to make

the finished product now available, the ability

to create a pure cannabis extract is within

reach of most licensed cannabis growers and

processors.

Although the science behind the machinery

is complicated, Cory Balma, principal at

Root Sciences, says the learning curve is not

56 | Marijuana Venture // July 2016


Kind LED


too steep.

“It’s actually fairly simple, and there’s not

a lot of hand-holding,” Balma says. “The

equipment works well, and someone can

learn how to operate it in a relatively short

period of time.”

The equipment used to create THC distillate

looks like something out of a college

chemistry lab (and many college chemistry

labs do have advanced distillation equipment).

The basic principles behind the creation

of the pure distillate are straightforward.

“The process includes a heating, vapor

and condensing phase, and ultimately can be

achieved in a number of ways,” says Derek

Houston of Helderpad, another company that

sells equipment used to make THC distillate.

“The differences in equipment and specific

processes change the production capacity

and overall quality of the oil.”

From a practical standpoint, the reason a

pure extract is a potential game changer is

easy to comprehend: Its odorless, tasteless,

highly refined, super-potent qualities mean

that it can be used in a vast number of products

and applications. For example, edibles

can be manufactured without the cannabis

flavor some consumers find unpleasant; vape

products can be made with or without added

flavors, depending on preference; medical

marijuana products can be created with more

accurate dosing and guaranteed pure ingredients.d

consumers.

Above: The jar on the left contains 200 grams of pure THC

distillate; the middle jar is filled with terpenes that have

been removed from cannabis extract through molecular

distillation and the jar on the right is winterized hash oil.

Below: Root Sciences utilizes German engineered VTA

processing equipment to handle molecular distillation.

At a glance

For more information on “The

Clear” and the equipment used

to create it:

Nenad Yashruti

Suspended Brands/Root Sciences

Office: 206-383-2143

Nenad@Suspendedbrands.com

Derek Houston

Helderpad

Mobile: 206-245-5800

Office: 312-884-1716

derek@helderpad.com

58 | Marijuana Venture // July 2016


Hydrobuilder


TOK

&

Tech

Tree of Knowledge products are on the cutting-edge of cannabis

― ― ―

By JOY BECKERMAN

There is nothing more inspiring than purpose-driven

ingenuity.

One shining example is Tree of Knowledge,

which combines the motivation to heal

with applied science and business acumen.

Co-founders Brian Main and Michael Caridi

break into smiles when describing their EVR line

of hemp-derived CBD products and the cutting-edge

technology they’re developing (see sidebar).

TOK’s product line includes premium

hemp-derived CBD oil, tinctures,

capsules and vape pens, all of which are

produced under the highest manufacturing

standards. Verified lab results can be

accessed by a QR code, allowing consumers

to view details about the precise

lot and batch of the product they want to

purchase.

The EVR products are derived from

60 | Marijuana Venture // July 2016


Northwest

Cannabis

Solutions



IF A COMPANY

WANTS TO BE

RELEVANT FIVE

YEARS FROM NOW,

THEN THERE MUST

BE A STRONG

PRESENCE IN THE

TECHNOLOGY END

European industrial hemp cultivated

through time-tested methods and

processed under stringent regulations.

All products are inspected and

lab-tested prior to shipment. Cannabinoids

are organic compounds that

can break down or degrade if not

stored properly, so all products are

analyzed again when they arrive in

the United States. TOK has U.S. and

international distribution agreements

in place, and its products can be purchased

online.

TOK is far more than just a

business venture. Main, a Northwest-born

veteran and entrepreneur,

met Caridi, a Northeast business development

virtuoso, in 2010. They

worked together on several real estate

and investment projects, including

the modernization of a hydropower

plant in Montana where they

installed new generators in existing

dams.

In late 2010, Main was approached

by a group looking to explore cannabis

industry endeavors in New York.

Main had already begun to focus on

the non-euphoric aspects of cannabis

after experiencing a horrific car accident

that left him with pins in his

shoulder and legs. He refused to rely

on opioids, and years of living with

the pain and severe headaches from

The Tree of Knowledge vending kiosk

acts as a self-service cashier that

reduces wait times and clerical errors.

62 | Marijuana Venture // July 2016


Nexus Greenhouse


Tree of Knowledge

products


Pharmacogenomic

testing (genetic enzyme

marking technology):

This is a cheek swab test kit (sometimes known as a

gene SNP kit) for health care practitioners that analyzes

the genetic disposition of the patient for metabolic

data. This information provides an indication of

how the patient will metabolize various cannabinoids,

including how various cannabinoids react with other

medicines being taken by the patient. Interactions

between certain medicines and cannabinoids can be

problematic. Monitoring the rise or fall of enzyme levels

can aid in the diagnosis of a variety of conditions.

Knowing the metabolizer status of a patient helps

practitioners in dosing and choosing a pharmaceutical

strategy more effectively than the trial-and-error

dosing models that are common practice.

The BrainBit

measures brain

activity to

determine the

effectiveness of

different types

of therapy.

Nasal spray

delivery technology:

TOK is the exclusive licensee of this patented technology

for CBD from cannabis. Nasal sprays are an effective

delivery method, especially when rapid absorption

is necessary, such as during an epileptic seizure. Nasal

delivery may also assist with challenges related to poor

bioavailability and gastrointestinal tract distress, while

also avoiding the first-pass metabolism in the liver.

Identification

verification system:

TOK has a licensing agreement for a state-of-the-art

identification verification system created by a team of

software developers in both the financial compliance

and casino gaming arenas. The kiosk technology was

created for the rapidly emerging sector of self-service,

where terminals are capable of conducting transactions,

but unable to verify government-issued identification.

TOK’s kiosks also use biometric markers to enable

a repeat use account to meet regulations.

those injuries left him feeling rusty and aged before his time. He

found relief in cannabis, but as he grew older, he could no longer

tolerate the euphoric effects of THC.

As Main explored CBD and non-euphoric cannabinoids to treat his

own pain, he also began to study the effect of CBD on veterans suffering

from PTSD, another condition that hits close to home for him.

As Main and Caridi became increasingly encouraged by the peer-reviewed

research and anecdotal evidence, they developed a joint mission

to provide high-quality CBD products and to develop systems

that will benefit the cannabis industry through technology.

“Because we believe in what we’re doing, we insist on delivering

the highest standards in everything we do, and we have the ex-

64 | Marijuana Venture // July 2016


RX Green Solutions


Vending kiosk:

This system, which can incorporate identification

verification, enables the payment of purchases

at the kiosk by bridging the gap between live

tellers and advanced cash handling machines.

The system is uniquely focused on point-of-sale

for hospitality and retail operations, where it can

reduce lines, increase speed of self-service and

reduce clerical errors. It also caters to consumers

who do not wish to interact with a salesperson

or cashier.

EVR BrainBit EEG:

The BrainBit is a small, wearable electroencephalography

(EEG) device that monitors and

records electrical activity of the brain. This data

may be used to measure and compare brain

activity before, during and after cannabinoid

therapy. For example, brain activity can be measured

during a seizure or PTSD event, and then

measured again after treatment with cannabis to

help determine the drug’s efficacy. Initial models

will be designed for health care practitioners,

but a personal use device is planned for release

within 2016.

perience and team to navigate the

churning waters of cannabinoids

quality of life,” Main says.

In addition to its EVR product

line, TOK has heavily invested

in the technology sector of the

cannabis industry. The company

formed an advisory board consisting

of leaders from virtually every

sector, ranging from medicine to

professional sports to the military.

The company’s strategic partners

include nationally renowned scientists

and researchers, as well as

some of the top software developers

in international financial compliance

and casino gaming.

“Markets are controlled by systems

that are in place,” Main says.

“If a company wants to be relevant

five years from now, then there

must be a strong presence in the

technology end.”

Given the outrageous barriers to

formal research of cannabinoids,

TOK sought out the leading experts

in the field in order to ascertain the

most reliable data available and create

the first models of its diagnostic

tools. Some of these tools have been

created for health care practitioners

in states that either allow or require

providers to prescribe dosing instructions

or other specific directions

for cannabis patients.

Joy Beckerman is the president

of Hemp Ace International and

president of the Washington chapter

of the Hemp Industries Association.

She is a member of Tree of

Knowledge’s advisory board.

Clarification

The company featured in this story, Tree of Knowledge, is incorporated as

Tree of Knowledge, Inc. in Nevada and Tree of Kindness, Inc. in Washington.

Its only public website is www.evrcbd.com.

It is a completely separate organization from Tree of Knowledge, Inc. in

Washington, which is a state-licensed cannabis producer (tokinc.com).

Carrie Zech

Elma Airport

66 | Marijuana Venture // July 2016


Futurola


WHAT

MAKES

YOUR

SOUL

SHINE?

Commercial grow operation goes

beyond bud to create a company that

also gives back to the community

Story by GREG JAMES

Photos by GARRETT RUDOLPH

and PATRICK WAGNER

68 | Marijuana Venture // July 2016


Seline McCormick fine-tunes

crops inside one Soulshine’s

13 grow rooms.

www.marijuanaventure.com | 69


70 | Marijuana Venture // July 2016


For many people in business,

the ultimate challenge is balancing

the drive for financial

success with company values

that emphasize workplace harmony, charitable

giving and being environmentally

friendly.

The inherent conflict between behaving

like a good corporate citizen and the

realities of a profit-driven enterprise is

at the forefront of many executives’ and

business owners’ minds. There are, after

all, many complex issues that may need

to be addressed when formulating company

policies, if social good is part of the

enterprise’s DNA. For example, how do

companies make a good profit while also

compensating employees fairly? How

much waste generation is acceptable if

it costs more to recycle? Can you reward

shareholders and investors while also doing

the right thing for the environment

and future generations?

These are questions faced by companies

as big as ExxonMobil, Costco and

Amazon and as small as mom-and-pop

grocers and various sole proprietorships.

In the end, business can be a delicate balancing

act.

ExxonMobil, under former CEO Lee

Raymond, was vilified for its role in the

Exxon Valdez disaster, but has also been

widely praised by shareholders for its

spectacular returns over several decades.

Costco, often criticized by Wall Street

for paying employees too much and not

focusing enough on the bottom line, has

happier employees and a far lower turnover

rate than Walmart. Amazon, regularly

accused of worker abuse, has become

one of the world’s most valuable corporations

in a little more than two decades.

All companies face this delicate balancing

act, and the legal cannabis industry is

Far left: Soulshine coowners

Patrick Wlaznak

(left) and Mike Mercer

take a photo-op with

recent rescues Rootie

and Molalla.

Above: A dense forest

of colas populate the

grow rooms just days

prior to harvest.

www.marijuanaventure.com | 71


Eden Labs


no different.

Soulshine Cannabis, a Washington-based

cultivator of high-quality marijuana,

has established a mission of doing

the right thing for the environment and

important social causes, while simultaneously

growing in a manner that some

would say is inconsistent with the ethos

of traditional conservation practices. This

raises an interesting question: Can an indoor

farm produce superior flower and be

socially responsible at the same time?

WELL, CAN IT?

Soulshine co-owners Mike Mercer and

Patrick Wlaznak were both involved in


CAN AN INDOOR

FARM PRODUCE

SUPERIOR FLOWER

AND BE SOCIALLY

RESPONSIBLE AT

THE SAME TIME?

the finance industry when they met more

than a decade ago. Wlaznak eventually

quit the business, and decided to look at

other opportunities. As luck would have it,

the two men reconnected at a charity event

in 2014. It was there that they discussed

the emerging legal marijuana business,

and what it might mean if they teamed up.

Mercer knew investors who were interested

in getting involved, and Wlaznak had

some strong connections on the grow side.

They both mused … maybe this could lead

to something?

In addition to their similar backgrounds

From top to bottom: Robbie Louque

and Frank Lane midway through

harvesting Soulshine’s first crop; a

farmhand stops to display harvested

colas on their way to being

trimmed; Patrick Wlaznak and Mike

Mercer amid the foliage.

www.marijuanaventure.com | 73


Robbie Louque

pulls the nets

carefully from

the top of the

canopy during

harvest.

74 | Marijuana Venture // July 2016

in finance, both entrepreneurs live in the Seattle

area, and wanted to keep their base close

to home in Seattle’s rapidly-expanding recreational

market.

“An interesting discussion came up when

we considered the type of grow we wanted

to create, and the resulting carbon footprint,”

Wlaznak says. “If you’re growing inside under

artificial lights, the assumption is that you’re

creating a bigger carbon footprint than someone

using the sun. However, in this business,

where the retailers are concentrated mostly on

the more populous west side of the state near

Seattle, and the prime sun-growing areas are

150-200 miles away on the rural east side,

the added fuel used to make sales calls and to

transport the product is fairly significant.

“In other words, if you’re a wheat farmer

growing one big crop on 2,000 acres that you

sell to a single buyer once a year, the way to

operate is obvious. On the other hand, if you’re

in the marijuana business, and you’re only allowed

half an acre of canopy, and you’re selling

to 100 different stores spread over a wide

geographic area, the question of efficiency and

carbon footprint becomes a bit more murky

and harder to pin down, and therefore, proximity

becomes a much bigger factor.”

Mercer and Wlaznak spent many months

looking for the right space. Their original

intent was to lease about 15,000 square feet

of space and apply for a Tier 2 license. This

proved problematic because many landlords

didn’t want a marijuana business located on

their property, or the space just didn’t seem

right. One landlord even promised them a

lease, and then promptly backed out and applied

for his own grow license.

Eventually, their real estate broker found

them a large, 50,000-square-foot location in


Twister Trimmer


A portion of Soulshine’s sales will go to

Emerald City Pet Rescue as part of the

company’s charitable mission.

Soulshine’s warehouse was formerly

Skate Barn West, a giant indoor skate

park. The size of the facility will allow

Soulshine to continue to expand.

Photo courtesy Dan Hughes.


WE KNEW THAT

TRYING TO FIT A

SQUARE PEG IN

A ROUND HOLE

WASN’T THE WAY

TO APPROACH THIS

NEW INDUSTRY

Renton and showed it to the entrepreneurs.

They both loved it and a deal was done. In

Mercer’s words, it was a “home run,” but

it also presented another challenge: Originally

they had discussed the idea of a medium-sized

grow with about 7,500 square

feet of canopy. With the new space, it was

obvious they would be expanding to a fullblown

30,000 square feet of canopy, the

largest operation allowed under state law.

As the two discussed the future of Soulshine,

they realized they saw eye-to-eye

on several key points: (1) Their product

would always be “top shelf,” and no compromise

would ever be made on quality;

(2) In order to create top-shelf product, a

state-of-the-art grow facility would be required,

and built from the ground up, with

an emphasis on numerous individual clean

rooms that could produce as self-contained

units; (3) The company would operate as

efficiently as possible, and utilize sustainable,

low-impact packaging whenever applicable;

(4) Soulshine would operate in

76 | Marijuana Venture // July 2016

a manner that reflected the importance of

teamwork, employee satisfaction and customer

relationships; (5) Finally, Soulshine

really would have “soul,” by donating a

portion of its sales to Emerald City Pet

Rescue, a non-profit that focuses on homeless

and neglected animals.

PUTTING PLANS INTO ACTION

Once the core values were established,

construction began. The warehouse they

settled on was ideal in many respects, and

had ample power. However, it was rough,

and had been used for many years as an

indoor skate park. Permits and inspections

were also hurdles as their cannabis farm

would be the first allowed in the city of

Renton. While the city had many questions

as it approached uncharted territory, Mercer

and Wlaznak were able to reassure city

officials and permits ultimately took only

a few months. The entrepreneurs decided

on a traditional business split when it came

to assigning duties: Mercer would oversee

sales, and Wlaznak would focus on growing

the product. As mentioned earlier, the

Soulshine goal is to create only top-quality

marijuana, and Wlaznak has his own take

on how that will be achieved.

“Our mainstay strains will be unique in

the industry, and we look forward to introducing

both newbies and cannabis connoisseurs

to their new favorites,” he says.

“We’ve also developed our own pH-correct

soil mixture that utilizes environmentally-friendly

fertilizers, mycorrhizae and

other natural additives. In addition, because

we’re utilizing a series of individual

sealed grow rooms, we have more control,

and can therefore catch any pests before

they can spread and do damage. We feel

confident that our system will allow us to

use only natural, organic pest mitigation

products. We’re also big believers in beneficials

and predatory insects that we will

use when — and if — they’re needed. All

of these factors, while adding upfront cost,

will allow us to dedicate more time to cre-


Kush Bottles


The Soulshine

team takes a

break to pose

for the camera.

ating ultra-high quality product.”

Soulshine’s goal of sustainability extends

to its packaging. All of Soulshine’s

boxes are compostable, recyclable and

non-wasteful. Mercer spent months researching

the printing/packaging business

and quizzed many store

owners and employees.

“Some of the best feedback

came from budtenders,

who had a lot of good suggestions

about sizing, layout

and copy,” he says.

The two men spent six

months touring more than

40 recreational marijuana

stores, and realized from

the many budtenders and

managers they interviewed that a highly

customer-centric approach would be

their style.

“We knew that trying to fit a square

peg in a round hole wasn’t the way to approach

this new industry,” Mercer says,

“so we decided to really focus our efforts

on creating products with a reverse engineering

method. In other words, what the

78 | Marijuana Venture // July 2016

customer wants, we will make.”

While a traditional market model is

driven by demand and consumer preferences,

outliers can, if they have the right

market savvy and products, create their

own niche and loyal following. Think

WE LOOK FORWARD

TO INTRODUCING BOTH

NEWBIES AND CANNABIS

CONNOISSEURS TO THEIR

“NEW FAVORITES

Subaru in the auto industry or Costco in

retail. Both are considered experts at their

niche and both enjoy an almost fanatical

level of loyalty from customers. Mercer

and Wlaznak believe they can achieve the

same in the crowded cannabis space.

“Our aim is to position Soulshine products

in the upper middle tier pricing-wise,

and to win customers slowly and steadily

with consistency, and unique products

that they know will never disappoint,”

Mercer says. “We think that THC levels

in the 20-27% range are probably ideal

for most consumers, and we believe that

actively involving our retail partners with

facility tours, education,

sales support and continuous

improvement will ultimately

lead to the kind of

loyalty that comes from a

lot of work and a genuine

effort to cultivate friends,

as well as partners.”

In the end, the cannabis

industry will evolve like

all others: The poorly prepared

will fall by the wayside,

and those with focus, a strong work

ethic, and a core set of values that clearly

define their purpose will survive. Soulshine

Cannabis, with its commitment to

employees, the environment, social causes

and high-quality products, is surely

positioned to be a long-time innovator in

the rapidly morphing and evolving retail

marijuana industry. MV


Growth Products


From Construction to Completion:

Because the Soulshine indoor farm is located less than half a mile from the Marijuana Venture offices,

we were lucky enough to be able to photograph the grow from its inception. The photos on

this page show some of the work as it was actually bring done, and the progress made over an

18-month period. Soulshine’s warehouse previously housed Skate Barn West for many years (photos

courtesy Dan Hughes).

80 | Marijuana Venture // July 2016


Confidence Analytics


CWCB Expo


Dash Hemp


THE

STRUGGLE

FOR

SUCCESS

84 | Marijuana Venture // July 2016


A drone captured

this overhead

shot of Revolution

Enterprises’

production facility

in Barry, Illinois.

Recent legislative changes are expected

to boost the state’s slow-moving medical

cannabis program, which has been hampered

by low patient enrollment, political infighting

and strict regulations

By SUE VORENBERG

www.marijuanaventure.com | 85


“THIS INDUSTRY

HAS PROVIDED

ME WITH EVERYTHING

I COULD ASK FOR.

IT’S GOT RISK.

IT’S GOT CONTROVERSY.

I FEEL LIKE WE’RE

IN A WAGON TRAIN

Strict regulations, low patient enrollment

and political infighting

all contributed to a slow start for

medical marijuana in Illinois.

However, while the fledgling program still faces a wide

range of challenges, business owners and investors have a

renewed sense of optimism with the expectation of several

legislative changes that provide an economic boost and, more

importantly, options for patients.

In May, lawmakers approved Senate Bill 10, which would extend

the Illinois Medical Cannabis Pilot Program until July 2020.

Licensed growers and dispensary owners now hold their breath as they

wait for Governor Bruce Rauner to sign the bill into law. At the time of

publication, the governor had not done so.

“We expect the governor to sign this legislation quickly,” said Tim McGraw,

CEO of Revolution Enterprises, one of the largest state-licensed cultivators in

Illinois.

The extension provides some assurance for the state’s slow-moving program,

which had been set to expire at the end of 2017 and had received little in the way

of help from a deadlocked state Legislature.

Despite the challenges ahead, the industry is far too young to write off just yet,

said Larry O’Hern, CEO of Nature’s Grace and Wellness.

HEADING WEST.

IT’S THE NEW

FRONTIER.

86 | Marijuana Venture // July 2016


FarmTek



ILLINOIS HAD

ENOUGH

CONSENSUS TO

PASS THE LAW,

BUT IT NEEDS

MORE BUY-IN

FROM STATE

LEADERS

Tim McGraw, CEO

of Revolution

Enterprises,

has established

two of the most

technologically

advanced facilities

in Illinois.

88 | Marijuana Venture // July 2016

For O’Hern, it’s been fun to run his

state-licensed cultivation business, even

with all the problems, he said.

“This industry has provided me with

everything I could ask for,” he said. “It’s

got risk. It’s got controversy. I feel like

we’re in a wagon train heading west. It’s

the new frontier.”

FLAWS IN THE SYSTEM

The state’s first medical marijuana

dispensaries opened in November 2015,

but as of June, there were only 7,000 patients

enrolled in the system. A total of

9,200 people had submitted applications.

Businesses say the program needs about

20,000 to 30,000 patients on the books in

the next six months to keep their doors

open.

The Illinois pilot program includes

about 40 qualifying ailments, but chronic

pain isn’t among them, which has contributed

to the slow start.

By comparison, one-third of all patients

in Arizona indicate “severe and chronic

pain” as their only debilitating medical

condition. Chronic pain, either by itself

or in conjunction with another ailment,

affects about 90% of Arizona’s nearly

80,000 medical marijuana patients.

However, assuming Rauner signs SB

10, patients suffering from post-traumatic

stress disorder and those with terminal

illness will now qualify for medical cannabis

— rectifying two glaring omissions

from the original legislation.

The addition of PTSD means thousands

of Illinois veterans and other residents

who have suffered traumatic experiences,

such as rape or abuse, will have access to

medical marijuana, McGraw said.

“Quite frankly, this will save lives,” he

added.

Recent legislation has also accelerated

the authorization process for patients with

terminal illnesses whom doctors give less

than six months to live. Their approval

time will be shortened to 14 days, compared

to time frames of up to seven weeks

previously.

Many in the industry have seen Rauner

as an opponent of the marijuana industry;

the first-term governor has rejected the

addition of several other qualifying conditions.


Vaporous

Technologies


PEOPLE ARE SICK, AND

THEY DON’T KNOW HOW TO

“HANDLE THE SYSTEM

“That’s cut down on the size of the patient

population,” said John Kagia, director

of industry analytics for New Frontier,

an informatics company focused on cannabis.

Another issue is that most of the larger

HMOs and physician groups have banned

their doctors from recommending cannabis

to patients. A handful of doctors

who have made recommendations face

lawsuits from the Illinois Department of

Financial and Professional Regulation for

recommending treatments without legitimate

doctor-patient relationships.

“Politics clearly plays a role,” Kagia

said. “One of the reasons why a market

like Colorado has been so successful is

that there has been very broad consensus

and collaboration, so the program was

implemented successfully. Collaboration

makes any system stronger. Illinois had

enough consensus to pass the law, but it

needs more buy-in from state leaders.”

TACKLING THE ISSUES

Some dispensaries are taking matters

into their own hands to increase the

number of patients, said Brad Zerman,

director of the Illinois Cannabis Industry

Association and CEO of the Seven Point

Dispensary in Oak Park.

“As soon as I was awarded a license

last year, I hired a licensed social worker

to do outreach to new patients,” he said.

“And that’s just grown, so now we’re doing

seven or eight patient workshops a

month in different towns. There’s clearly

a lot of negatives in Illinois that have

been reported over and over, but I’m actually

really positive.”

The workshops help patients fill out

paperwork, navigate the state system,

have an FBI background check and get

fingerprinted — all requirements for the

program. Attendance has been full to

bursting so far, Zerman said.

“We’re trying to make it a one-stop-

From top to bottom: Larry, Claire and Tim

O’Hern pose with Ryan McCraken (from

left to right) outside their Vermont, Illinois

production facility; Unusual state rules

regarding advertising limit journalists’ ability

to cover the cannabis industry in Illinois.

90 | Marijuana Venture // July 2016


Forever Green


Final packaged

product from

Nature’s Grace and

Wellness on display at

a nearby dispensary.

shop for patients,” Zerman said. “People

are sick, and they don’t know how to

handle the system. So we have a team

of people on these workshops, and so far

it’s working.”

SB 10 should help alleviate this pain

point as well, by streamlining the doctor

certification process.

“Essentially, doctors will no longer be

required to recommend medical cannabis

treatment for patients, but will just need

to certify that a patient has a qualifying

condition,” McGraw explained. “This

should help accelerate patient population

growth as well.”

Zerman’s team is also contacting physicians

and offering them free training on

cannabis — how it works medically, and

also how to make patient recommendations

under the constraints of the system.

“We also work with patients to help

them educate their doctors. We have materials

we give them,” he said. “And we

can follow up with those doctors and educate

them.”

The outreach is a way for the dispensary

to grow its own client base, he added.

“There are a lot of critics, but to me

it’s about finding all the positive parts

Maverick Label

92 | Marijuana Venture // July 2016


Trimpro


Revolution Enterprises’ Delavan,

Illinois grow facility, which brings

the company’s total to 150,000

square feet of production.

Illinois game-changer


Several key provisions of

Senate Bill 10 breathe new

life into the Illinois Medical

Cannabis Pilot Program,

including:

1.

Extending the pilot program

to July 1, 2020 (the

program had initially been set

to expire in 2017).

2.

Adding post-traumatic

stress disorder and

terminal illness as qualifying

medical conditions.

3.

Making patient and caregiver

cards valid for three

years instead of one.

4.

Eliminating the fingerprint

requirement upon renewal

of patient and caregiver cards.

5.

Changing details about

required doctor-patient

relationships; doctors will

only have to certify that there

is a bona fide doctor-patient

relationship and that the

patient has a qualifying condition,

rather than specifically

recommending the use of

medical cannabis.

6.

Allowing minors who

are patients to have two

caregivers.

94 | Marijuana Venture // July 2016

of the program and working to expand

them,” Zerman said. “We’re spending a

lot of money, but I think it will be worth

it.”

He estimates the company spent between

$40,000 and $50,000 on outreach

in the past year.

Meanwhile, Larry O’Hern said his

cultivation facility is actually running

well and supplying medical marijuana

to a handful of the 37 dispensaries that

have opened thus far.

The farm is one of 21 licensed cultivation

centers, but several have yet to

begin producing crops. “We’re one of

the few cultivators that is locally owned

and self-funded, which has helped us,”

O’Hern said. “We saw it as an agricultural

enterprise, and we think it’s been

well-received so far.”

Some cultivators have scaled back

production or held off on construction

because they’re waiting for more patients

to be registered. Patient enrollment

and dispensary revenue have both

shown steady growth, ranging between

10-20% per month. During the month

of May, Illinois dispensaries sold nearly

$2.3 million worth of cannabis, bringing

the program’s total up to $10.8 million

over its first seven months.

“Our hope is it’s going to get better,”

said Tim O’Hern, chief operations officer

of Nature’s Grace and Wellness and Larry

O’Hern’s son. “The patient count has improved

slowly, but steadily. They’re approving

about 400 new patients a month

right now. But it’ll be interesting to see

what total patient number is needed to

support the industry.”

Tim O’Hern said he thinks at least

100,000 patients will ultimately be needed

to sustain the program.

“Illinois has a population of 13 million

Security requirements in Illinois

mandate bio-metric keycard access

and 24-hour video surveillance.


Groco



IT’LL BE

INTERESTING

TO SEE WHAT

TOTAL PATIENT

NUMBER IS

NEEDED TO

SUPPORT THE

INDUSTRY

people, and as things move forward, we

think we’ll have a viable industry with

what we’ve got here,” he said. “We’re

still working things out, but I don’t think

it’s as much gloom and doom as people

foresee. It’s really just about increasing

patient access and helping them find

doctors who are willing to work with the

system.”

NEXT STEPS

For now, one of the biggest goals for

the young industry has been achieved

with the extension of the Illinois Medical

Cannabis Pilot Program.

Scott Miller, the owner of Salveo

Health & Wellness in Canton, said the

political climate has been a mess. Politics

being what they are, marijuana is

largely an afterthought for state lawmakers,

Miller said.

There’s still a lot of skepticism about

medical marijuana, particularly among

Republicans, Miller said.

“From a party standpoint, they’re going

to go slower rather than faster,” he

said. “But there’s been so much money

spent here by sophisticated people that

know their state reps, that have fundraised

for state reps, that we don’t think

they’ll leave us high and dry.”

But SB 10 is a game-changer for Illinois,

McGraw said.

“Although we had a slow start because

of some early vetoes by the administration,

we are confident about the longterm

success of the program,” he said.

“I think, initially, the biggest issue was

that the pilot program wasn’t really on

the current administration’s radar; there

may have also been a lack of support

as the pilot program was inherited from

former Governor Pat Quinn’s administration.

With the signing of this bill, that

all changes,” he added, applauding lawmakers

on both sides of the aisle for negotiating

a fair, but ultimately beneficial

compromise for the industry.

Zerman said adding more patients to

the program is still critical.

“I think it will be harder for the Legislature

to reject the program extension if

there are 20,000 or 30,000 patients in the

program,” he said. “And I think we have

to do that as an industry.”

Marijuana Venture editor Garrett Rudolph

contributed to this story.

Vital Garden Supply

96 | Marijuana Venture // July 2016


NCWGS

(Nickle city)


98 | Marijuana Venture // July 2016


A Teaching Tool

for Hemp

Bringing it Home remains a relevant, impactful film as the industrial hemp industry

continues to fight a battle of misinformation and illogical prohibition

― ― ―

By GARRETT RUDOLPH

In the fall of 2010, Linda Booker picked up a copy of USA

Today that featured the first permanent home in the United

States made from hemp-based building materials.

The Asheville, North Carolina, home was celebrated for

its eco-friendly, nontoxic design, but also highlighted the

fact that the U.S. largely recognized as the only industrialized

country in the world that prohibits hemp cultivation.

Booker, who describes herself as a

natural cynic, had already begun researching

the uses of hemp at the urging

of fellow filmmaker, Blaire Johnson.

The multitude of uses for the forbidden

plant — ranging from biofuels to

building materials to high-protein food

supplements — led Booker to think the

claims were too good to be true.

But as she and Johnson began work on

a short film about the Asheville home,

Booker was quickly became a believer.

Before she knew it, she was flying to the

International Hemp Building Symposium

in Spain and meeting with some of

the global leaders in the hemp industry.

The end result was Bringing it Home,

a documentary co-directed by Booker

and Johnson, which immediately became

a teaching tool for hemp advocates

across the U.S. Even three years after

the film’s initial release, it continues to

influence legislative changes.

www.marijuanaventure.com | 99


Glynis Murry and Henry

Braham, the founders of

Good Hemp Oil, walk around

their industrial hemp farm in

North Devon, England.

Marijuana Venture:

What captured your attention for the

potential of using hempcrete and other

hemp-based building materials in

construction?

Linda Booker:

I think the thing that struck the biggest

chord was the health and environmental

benefits from hempcrete.

If you look at it from plant to finished

product, it’s a major carbon-saving

material, and as we show in the film,

at the U.K. facility, it ended up being

a carbon-negative building material.

On top of that, this material regulates

temperature and humidity, and could

almost eliminate the need of a heating

and cooling system for everything from

a townhouse to a warehouse, which is

amazing. We learned about the incredible

properties of the material, it being

a natural lightweight fiber, a concrete

product that could resist mold and mildew.

I live in the South and that’s a major

problem in so many buildings.

Everything always resonates more

when you have a personal connection.

100 | Marijuana Venture // July 2016

The lightbulb started going off for me

when I thought back about how I felt

the first week I was in my new house.

Our builder had used all the conventional

building materials and never introduced

the topic of nontoxic, healthy

or sustainable materials. The first time

Linda Booker

I had asthma was in our new home,

and it was the flood of chemicals and

the off-gassing of all the materials from

the paint to the floor sealant to the new

furniture.

It was quite a learning journey for me

in making Bringing it Home, and also

doing the research and educating myself

about chemical products in general.

The healthy homes were a powerful

part of the film, to think about using

hempcrete in everything from schools

to hospitals and office buildings. We

had a segment that eventually didn’t

make the cut about Sanjay Gupta talking

about how more than 30% of our public

school buildings have mold and mildew

in them. From the get-go we’re exposing

children to unhealthy environments.

And then there’s the environmental

side, to see the lumber, framing, insulation,

sheetrock — all of this stuff that

can be replaced with hemp-based products.

Until we get this plant grown on

the same level as corn and soybeans and

everything else, we’re not going to have

it readily available in the United States.

But in places like France and the U.K.,

they do have companies that are supplying

hemp. There’s so much potential for


Marijuana Business

Operations


construction, and right now, probably the

biggest consumer markets are food, nutrition

and body care products.

MV:

How has the film been received

by hemp advocates, politicians

and policy makers?

LB:

We couldn’t be more grateful for

industrial hemp advocacy groups

that have taken Bringing it Home and

used it as an educational tool. They were

thankful to us that they have a comprehensive

film they can do community

screenings with, as well as show policy

makers how hemp and marijuana are different.

I think that’s been helpful, because a

big obstacle has been for the advocates

to get the public policy makers to understand

the difference between the two.

Once people get it, they get it, but unfortunately,

the U.S. government still wants

to lump it all together.

It’s been interesting since the film came

out to watch this tremendous movement

happen as far as introducing legislative

policies in so many states. Now 27 states

have industrial hemp farming bills, and

we now have ten states that are growing

it on a research basis thanks to the

hemp amendment in the 2014 Farm Bill.

The biggest hurdle is still the DEA and

Department of Justice’s stubbornness to

change the definition, but I really think

we’re closer than ever. I don’t think it’s

going to be too much longer before it’s

changed.

MV:

It’s interesting that marijuana,

the intoxicating substance,

is rapidly gaining acceptance, while

industrial hemp seems to be caught in

somewhat of a standstill.

LB:

It’s frustrating. It’s frustrating for

the industrial hemp organizations,

and on a personal level, it’s frustrating.

Here we have something that can be a

solution for some very important issues,

even on a global scale. Believe me, I

For Sale: T-1

102 | Marijuana Venture // July 2016


GeoPot


started as a cynic about all the benefits

and I had to be convinced. But having

looked at this topic from all angles over

the last several years, it’s just such a

head-scratcher as to why hemp is not

being used more. A lot of it is money.

That’s where the focus is always going

to shift.

California looks like it’s next in line

to open up a billion-dollar marijuana

business. That gets a lot of attention.

What I wish is that some of the marijuana

advocates would become sustainable

industry leaders in other ways, and

invest in supporting the plant’s cousin

as a viable crop.

Like it or not, they’re tied together.

They’re part of the Cannabis sativa

plant family. It would be encouraging to

see some of the people making millions

of dollars now that laws have opened up

around marijuana say, ‘Here’s this other

part of the plant family that has so many

104 | Marijuana Venture // July 2016


IT’S JUST

SUCH A HEAD-

SCRATCHER AS

TO WHY HEMP

IS NOT BEING

USED MORE

uses beyond medicinal. Let’s help them

build a processing facility. Let’s help

farmers. Let’s help ag departments get

going on their policy.’ It’s just not happening

yet.

I know your readership is probably

more marijuana industry leaders, but

if I could get their ear, I would say,

‘Please, now that things are going so

well on that end, can you lend some

focus and attention and investment to

industrial hemp?’ It would be great to

see that happen.

MV:

How have you seen the film

used as an educational tool to

influence change?

LB:

I’m always thrilled when people

show it to legislators, because

this film has been able to cross a line

with them when they see the business

possibilities for it. Hemp is not a joke,

and it’s not just rope and that 20-yearold

T-shirt that’s still held up. It has real

and potential applications for uses ranging

from food, textiles, bio-composites,

building products and nanotechnology.

It’s been great to see the support in

Hawaii; I was invited to the state capitol

in Oahu and present Bringing it Home

at an agricultural meeting with several


senators there, and that definitely influenced

them to support introducing legislation.

I hope to get back to Hawaii and

do more filming, because they introduced

seven hemp laws recently and are building

beautiful houses using hempcrete.

They’re looking to hemp as a replacement

crop for sugarcane. This is a state

that imports almost all of their building

materials. It has huge potential in there

to lessen their imports by replacing them

with hemp products. It’s very cool to see

that happening.

And Kentucky and Colorado has been

on the forefront when it comes to getting

hemp going on a state level. Having

supportive agricultural commissioners

makes a huge difference.

MV:

What moments or locations

stand out to you about Bringing

it Home as being particularly

memorable?

LB:

I’d say the England trip, definitely.

It was the first time we were

standing in a hemp field. Here I had been

living with this topic for 18 months, and

then to finally be standing there with the

plant, touching it, smelling it and seeing

it, that was great.

And there are no fences, no signage,

no barbed wires. It’s just growing like

any other crop, and the neighbors and

law enforcement aren’t freaked out by it.

A lot of American companies have

sustainability as part of their business

model or vision, but it would be great to

see more companies embrace industrial

hemp and incorporate it into their sustainable

practices and products.

Certainly the auto industry could be

using hemp fiber for panels and dashboards,

like the European automakers.

Think about the impact the auto industry

could have in the U.S. alone. It’s just a

matter of time and policy change. The

Left: Kentucky has

become the national

leader in industrial

hemp production.

Photo by Gene

Linzy/courtesy

Hemp Industries

Association.

Above: Linda Booker

(left) and Bringing

it Home co-director

Blaire Johnson.

www.marijuanaventure.com | 105


Rosin Press Kings


Hemp Technologies consultant

Mike Giffin gives Blaire Johnson

a guided tour of hemp farm just

west of London.

federal policy is the biggest hurdle and

until the Industrial Hemp Farming Act

or a similar bill passes, we won’t be

able to compete at the same level as

Canada, Europe, Australia and China.

It’s just that simple.

MV:

What are the next projects

you’re working on, and how

involved do you stay in the industrial

hemp sector?

LB:

IT’S EASY FOR BUSINESSES TO CHANGE,

AND CAN LEAD TO SOLVING THE BIGGER

PROBLEM OF PLASTIC POLLUTION AND

“PLASTIC MARINE DEBRIS

Bringing it Home got me more

passionate about environmental

issues. However, the enormity of those

issues can be overwhelming. My next

project is a short film and I want to focus

on something very small that can

lend itself to a much bigger issue, and

that is plastic litter pollution.

You can go to strawsfilm.com and

see the beginning of it. I found an advocate

in the Monterey Bay area that has

been on an anti-plastic-straw crusade

for a few years now. Her organization

is called The Last Plastic Straw, and focuses

on that one thing that is an easy

thing for people to change. It’s easy for

businesses to change, and can lead to

solving the bigger problem of plastic

pollution and plastic marine debris.

I know we all get a little weary about

so much happening around environmental

issues. You can only be engaged

at a certain level for so long. It’s kind

of depressing. It’s not happy news from

day to day.

For me, hemp has so much possibility

and so much hope. I have to be

convinced of something to say words

like ‘hope’ and ‘possibility.’ But I truly

believe this is grounded. There’s so

much that can be done, and all it will

take is some policy change. If there’s

one thing I can leave people with, it

is, please go to VoteHemp.com, please

go to Hemp History Week’s website,

please take the one or two minutes to

write a letter to your senator, make the

phone call.

I used to be very skeptical that phone

calls to lawmakers did anything, but

they do take notice if enough people

start to rally around a certain topic.

The momentum is there. Let’s keep

it going. Let’s make that policy change

happen. MV

www.marijuanaventure.com | 107


Respect, Love &

With marketing savvy

and a business plan

that extends far into

the future, David Tran

is pushing Dope to

consumers throughout

the country

By PATRICK WAGNER

108 | Marijuana Venture // July 2016


David Tran’s growing cannabis

culture empire began with

Dope Magazine.

www.marijuanaventure.com | 109


In addition to publishing a

culture magazine, Tran hosts

the annual Dope Industry

Awards and the Dope Cup,

where he’s been able to

meet celebrities such as

hip-hop icon and Public

Enemy hype-man Flavor Flav

(pictured below).

For David Tran, Dope isn’t just the name of his company.

It’s a standard.

In the span of five years, Dope Media has become more

than a publishing company, with events and licensed products

found all around the country, and Tran has helped

launch a new identity for cannabis consumers.

“We always say, ‘Everything we do

has to be dope,’” Tran says. “The magazine?

Has to be dope. Our events? Have

to be dope. Our products? Have to be

dope. Or we don’t put it out.”

Dope Magazine started as a local publication

for Seattle’s medical marijuana

market, but has expanded rapidly with

progressive cannabis legislation sweeping

the nation. Dope now publishes a

national edition with distribution in 24

states, as well as local versions in Arizona,

Colorado, Northern and Southern

110 | Marijuana Venture // July 2016

California, Nevada, Oregon and Washington.

After working his way up the ranks of

the nightclub industry, from bar-back to

successful promoter and bar owner, Tran

first joined the cannabis industry in 2011

as Washington’s medical market began

to flourish.

“I was running bars on the marketing

and entertainment side and a friend came

up to me and said, ‘Hey, are you interested

in cannabis?’” Tran says. “I thought I

knew everything about it.”

He co-founded the Ballard branch of

the Conscious Care dispensary chain.

Many business owners would have

followed the route of opening multiple

dispensaries, possibly branching into

cultivation, manufacturing and advocating

legislative changes. In Tran’s case,

he immediately began looking for avenues

to promote Conscious Care. He

looked at his coffee table and realized

his advertising options were extremely

limited in print media.

At that time, there were just a couple

magazines covering the medical marijuana

sector.

“One was a small pamphlet and their

prices were $2,000 a page because they

were the only people doing it back in the

day,” Tran says. “The other was a newspaper

rag.”

So Tran created his own marketing vehicle

with Dope Magazine, an acronym

for Defending Our Patients Everywhere

(which eventually evolved into Defending

Our Plant Everywhere).

With $30,000 and a shared booth at

Seattle Hempfest, Tran found enough interest

from consumers and advertisers to


Cannabis Benchmarks



WE ALWAYS SAY, ‘EVERYTHING WE DO HAS TO BE

DOPE.’ THE MAGAZINE? HAS TO BE DOPE. OUR

EVENTS? HAVE TO BE DOPE. OUR PRODUCTS?

HAVE TO BE DOPE. OR WE DON’T PUT IT OUT.

launch Dope Magazine.

The first issue featured Seattle Mayor

Mike McGinn on the cover, bringing

national attention to the startup publication.

“CNN picked it up,” Tran says. “MSN-

BC picked it up. They said, ‘Look at the

mayor of Seattle … what a dope.’”

The media coverage worked as a promotional

tool for Tran’s magazine, and

it quickly gained momentum across the

western medical states. Following the

magazine’s roll-out, the company began

hosting the Dope Cup, a celebration of

cannabis culture, which has continued

to grow each year. The 2016 party drew

more than 2,000 attendees.

The Dope Awards came next, and both

events have grown into cultural centerpieces

in their own rights.

More recently, Tran began to notice

the lack of marketing and business experience

among cannabis producers, which

led him to license out the Dope brand.

“We wanted to make sure the magazine

was a staple,” Tran says. “As we

started solidifying that, we knew events

were really the second stage of our evolution.

Because I was in the bar industry

and I promoted events, it was still in our

wheelhouse.”

With interests in nearly every angle of

cannabis culture, business continues to

accelerate for Dope Media.

“We’re growing really fast,” Tran

says. “We just got done with a $1.5 million

capital raise. What that’s telling me

is that people who are inside and outside

the industry are looking at cannabis and

are seeing us as a lifestyle brand that’s

different from all the other companies

who touch cannabis.” MV

Portland Store

Fixtures

112 | Marijuana Venture // July 2016


CannaSol


ENERGY

Cannabis growers will have to become more energy-efficient as the

developing industry moves forward

― ― ―

By WALTER STARK

A2015 Gallup poll found that 58% of Americans believe

marijuana should be legal in the United States.

Considering that in 1969, just 12% of Americans

held this view, it’s fair to say the tide is turning for

the marijuana legalization movement.

That’s good news for cannabis growers;

however, the industry’s high energy

consumption is already of great

concern to utilities, municipalities and

environmentally-conscious Americans.

Research indicates marijuana grow-

114 | Marijuana Venture // July 2016


Air-Pot


MARIJUANA GROWERS ARE RESPONSIBLE FOR 1%

OF THE COUNTRY’S TOTAL ELECTRICITY USAGE

ers are responsible for 1% of the country’s

total electricity usage. With more

commercial grow facilities starting, this

percentage is expected to rise accordingly,

leading utilities and municipalities to

caution growers that continuing this trend

could have serious repercussions.

For growers, there are several incentives

for transitioning to more sustainable

energy practices. Energy-efficient operations

will not only cultivate a more positive

image with the American public, but

they will also reduce their operating costs

and avoid future conflicts when government

agencies and utilities clamp down

on energy consumption.

Understanding the full scope of this

problem is imperative for proactive cannabis

growers who want success for their own

businesses and for the broader industry.

A CLOSER LOOK

Although 1% of the nation’s total consumed

energy might not sound like a lot,

it’s the amount of energy needed to power

1.7 million American homes, based on

data reported in The Carbon Footprint

of Indoor Cannabis Production, by Evan

Mills, Ph.D., a staff scientist at Lawrence

Berkeley National Laboratory.

At the regional level, the Northwest

Power and Conservation Council projects

that if the current rate of energy

consumption by cannabis growers in the

Northwestern states continues, it will

double from 130 megawatts in 2015 to

237 megawatts in 2035. This calculation

was based on the projected increase of

Americans’ use of marijuana.

To gain some perspective for how

things look on a state level, consider

Colorado, which legalized marijuana in

2012. By 2014, data from Xcel Energy

officials indicated that grow facilities

in the state had consumed 200 million

kilowatt-hours (kwh) of electricity. In

Denver, where the majority of the state’s

grow facilities are located, the 354 grow

facilities in operation at that time were

tracked at using 121 million kwh — a

significant increase from the 2012 figure

of 86 million kwh for the 351 facilities

operating that year. By 2014, Denver

grow facilities were responsible for 2%

of the city’s electricity consumption. As

of 2015, Colorado had more than 1,200

licensed grow facilities, which were responsible

for more than 50% of the increased

energy demand across the state,

according to a Bloomberg News story by

Jennifer Oldham.

Here are some other statistics projecting

the marijuana grow industry’s high

energy consumption:

• Its consumption of 1% of the nation’s

electrical output represents a cost of $6

billion annually and produces the equivalent

of 15 million tons of greenhouse gas

emissions, which is equal to that produced

The grown-up grow operation

Checks and balances for labor, electricity and more play a bigger role as cannabis

grow operations begin to mimic traditional ag manufacturers

― ― ―

By DAVID HODES

Building and operating an efficient grow facility begins

with the design process.

Rather than looking at the current market, growers

need to look three or four years down the road.

“If you design a facility based on what you are thinking

now, you are dead in the water,” says Jan Carlos Byl,

founder and managing member of MedCanna Consulting

Group.

“There is a lot of intricacy to all of this growing,” he says.

“You have to track growth, collect data and dial in the

light level, temperature and humidity to get the plants to

be the best that they can be.”

USE OF RESOURCES

According to Byl, one of the biggest mistakes indoor

growers make is having a large open space where all

the plants are growing. The result is a lot less individual

attention and more of a broad-strokes approach to cultivating

large quantities of plants, he says. It also reduces

116 | Marijuana Venture // July 2016


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Tech Spotlight

Dehumidification advancements, such as

MSP Technology’s wrap-around plate

systems, represent a new wave of options

for growers looking to implement more

energy-efficient practices.

The MSP system boasts 39-58% energy savings

compared to traditional dehumidifiers.

Utilities are excited about this technology

because of the potential energy savings and

reduced greenhouse gas emissions. It also

promotes sustainability by enabling growers

to use recycled water for irrigation through

the regenerative thermal exchange.

Grow facilities are seeing additional benefits,

including prevention of mold and airborne

pathogens and lower maintenance costs.

Groundbreaking technologies such as

wrap-around plate dehumidification will likely

be developed specifically with cannabis cultivation

in mind, especially considering the

continued growth of the industry.

1. Warm, humid incoming air flows through

the first pass of the plate type air-to-air heat

exchangers for pre-cooling, initial condensing

and water production. This is achieved

by regenerative thermal exchange with the

cooler air leaving the heat exchanger.

Benefit: Pre-cooling, condensing and water

production by regenerative thermal exchange

are “free” and involve no additional

equipment.

2. Pre-cooled air then passes twice over

conventional cooling coils for final condensing

and water production.

Benefit: Pre-conditioned air can be treated

much more efficiently, using smaller compressors

that require as little as half the power.

3. The cool, dry air is then drawn back

through the opposite side of the heat exchanger

where it absorbs heat from incoming

air and continues to control humidity in

the conditioned environment.

Benefit: There is no heating coil — and no

energy penalty — needed to reheat the

dehumidified air before it enters the conditioned

environment.

by 3 million average cars in a year

(The Carbon Footprint of Indoor

Cannabis Production, Evan Mills);

• The U.S. marijuana grow industry’s

energy consumption is six

times that of the U.S. pharmaceutical

industry and eight times more

than the amount of energy required

per square foot in the average U.S.

commercial building (Columbia

Environmental Law Journal, “Regulating

Pot to save the Polar Bear:

Energy and Climate Impacts of the

Marijuana Industry,” Gina S. Warren,

2015).

• In Denver, the monthly electric

bill for Colorado Harvest Company’s

10,000-square-foot grow facility

was reported by the company

to be $12,000. Other facilities in

Colorado have reported bills almost

double that amount (Colorado Public

Radio, “How Much Electricity

Does It Take To Grow Marijuana?”

Grace Hood, 2015).

THE CANNABIS INDUSTRY

PRODUCES THE EQUIVALENT OF

15 MILLION TONS

OF GREENHOUSE GAS EMMISSIONS

LIGHTING

For cannabis cultivation facilities,

lighting accounts for the

greatest consumption of energy

— typically about 40% of its total

electricity usage. Not only does it

represent the highest energy usage

in an indoor growing facility, but

it’s also the biggest contributor to

the facility’s cooling requirements.

Currently, a variety of lighting

manufacturers are developing engrowers’

ability to effectively map out a harvest schedule.

A more efficient method is to have individual subdivided rooms. Byl favors

a dense canopy and shorter veg times, with the goal of producing

about 30 grams per square meter. That way, a room can be completely

harvested on the first day, cleaned the second day and back up and

running on day three.

Damian Solomon, director of cultivation for MedMen, says one key

variable for an efficient grow operation is to limit labor to about 30% of

total expenses. This can be easier said than done.

Grow operations often hire trimmers and other workers who are paid

minimum wage and have little or no background working in a production

facility.

“You have to have properly trained employees to perform the task,”

Solomon says. “That means consistent supervision for quality control.

You want to ensure that they are doing the right job as efficiently as

possible, and that they are not taking a lot of bathroom breaks or cell

phone breaks.”

He says supervisors in the cannabis industry are not collecting enough

data from their employees about what they are doing and when. Increasing

productivity, even if it’s only by a couple percent, means a

more profitable organization.

118 | Marijuana Venture // July 2016


Northwest Harvesting

Co


Many savvy growers, such as

Washington’s Trail Blazin’ Productions,

are switching to LEDs to reduce energy

consumption, both for the environmental

benefits and their bottom lines.

“You need to know what your fertilizer targets are and

then what your plants get,” he says. “You have to adergy-efficient

lighting solutions for the

cannabis industry, including ceramic metal

halide, double-ended high-pressure sodium,

LED and plasma fixtures.

Also being studied are fiber-optic energy

systems capable of streaming and

channeling sunlight into grow

facilities.

Creating step-by-step

checklists is one way to

track workers as they complete

tasks. It also helps

managers keep the process

on schedule and maintain

quality control.

Byl says labor efficiency is one of the biggest hurdles in

running a profitable grow operation.

“Labor is a killer,” he says. “I go into these grows and

there are 150 employees. This is mind-boggling. You

should have 25 for any sized grow.”

POWER CONSUMPTION

The electricity bill for an indoor facility can be enough

to sink an entire operation. The cost of lighting alone,

particularly at grows that use high-intensity discharge

bulbs, can be a major drag on profits. Add in all the electricity

needed to run water pumps, heating and cooling,

extraction equipment and trimming machines, and it’s

easy to see why growers are looking for any advantage

they can get.

120 | Marijuana Venture // July 2016

CALL TO ACTION

To encourage the industry’s proactive

pursuit of energy-saving methods,

both the utilities and municipalities

have responded with their own forms

of motivation. Municipalities are offering

both incentives and penalties to

promote energy conservation. In 2015,

Boulder County, Colorado, started requiring

marijuana grow facilities to use

renewable energy sources for half of


YOU NEED TO

KNOW WHAT YOUR

FERTILIZER TARGETS

ARE AND THEN WHAT

YOUR PLANTS GET

their production in 2015 and all of their

output starting in 2016. The county is

levying a surcharge of 2.16 cents per

kwh and applying the fees to the Energy

Impact Offset Fund for programs focusing

on more efficient ways to grow

marijuana.

In Oregon, the Energy Trust of Oregon

is providing cash incentives to marijuana

grow facilities that are actively reducing

their energy consumption, while many

utility districts in Washington state have

done the same. Other municipalities encourage

the development of new building

codes and/or LEED or Energy Star standards

to be applied in the design of new

grow facilities or retrofitting of existing

facilities.

The utilities are encouraging grow

facilities to modify their operations,

where possible, by rescheduling their

power draws to avoid peak demand

periods. Utilities are also asking grow

facilities to consider upgrading to

more energy-efficient lighting, as well

as offering incentives for energy-efficient

upgrades. Seattle City Light established

an incentive program

for this purpose, and it’s also

Solomon says the adoption

of new technology, like LED

lights, is gaining a lot of interest

in cannabis cultivation.

“They are used now in a lot of

vertical grow farms for food

production systems and are a

great way to lower energy consumption,” he says.

Not only are the lights themselves more efficient, but the

lower heat output allows facilities to use less cooling.

While there are ways to improve energy efficiency in an

indoor facility, part of the problem is the business model

itself. More and more, cannabis growers are following the

path of traditional agriculture by growing outdoors or in

commercial greenhouses.

DIGGING DEEPER

Solomon says a regular analysis of drain water can improve

the fertilizer content.


Terpp


ewarding growers for the use of other

energy-saving devices. One example is

variable-frequency drives that manage

a facility’s total HVAC energy consumption

by slowing the supply-air fan

and/or compressor to decrease energy

consumption when cooling demand is

lower than the HVAC equipment’s capacity.

Other technologies being recommended

for their energy-saving role

are economizers, which are integrated

with remote terminal units (microprocessor-controlled

electronic devices) to

draw in cool outside air to reduce cooling

energy requirements.

To help grow facilities reduce their energy

consumption, some utilities, such

as Xcel, consult with grow facilities regarding

these various technologies and

lighting and their related levels of energy

usage. Xcel also offers significant rebates

for the application of energy-saving

products and technologies, such as wraparound

plate dehumidification technology

with atmospheric water generation for irrigation

(see sidebar).

CONCLUSION

Moving forward, it’s safe to expect increased

regulations as demands for energy

conservation and sustainable practices become

amplified. Agencies like Oregon’s

Task Force on Cannabis Environmental

Best Practices are cropping up in states

across the country, ushered in by legislators

who are intent on gaining control of the

cannabis cultivation industry’s high energy

consumption.

In the meantime, responsible grow facilities

are doing their part to learn more

about measures they can take to contain

their energy usage and, at the same time,

gain valuable operational and competitive

advantages by doing so.

Walter Stark is the president of MSP Technology

and a widely-recognized thought

leader in dehumidification solutions. He has

more than 50 years of experience in the heating,

ventilating and air conditioning industry.

During his career, he has won numerous

awards, including the ASHRAE Regional

Award for An Energy Efficient Project and

the New York Governor’s Award of Energy

Excellence. He was also featured in Popular

Science magazine’s “Best of What’s New.”

LED lighting is steadily becoming a

greener alternative to high-pressure

sodium grow lights.

compared to liquid can be significant.

Byl says automation and specialization

are becoming more prevalent in

the cannabis industry. He points to

cultivators who outsource trimming

duties during peak productivity periods

as an example of how some facilities

save money.

just your fertilizer program to meet the needs of the crop

quickly, and give it what it needs for each phase of its life

cycle.”

Knowing the nutritional requirements of each stage of the

crop cycle helps determine what and how much fertilizer

to use, Solomon says.

One way of using fertilizer efficiently is to buy dry fertilizer

in bulk and mix it at the facility, instead of paying

to ship liquid fertilizer. The cost savings of dry fertilizer

Solomon says cannabis growers can

should take tips from other agricultural business operations,

like tomato and cucumber growers, that have to be

profitable at a much lower price per pound than marijuana

operations.

In the future, operations could utilize robots that designed

to harvest vegetables based on color and firmness.

“It’s very easy to be able to transition that type of technology

and tweak it a little for the cannabis space,” Byl

says. “It’s really about just a transfer of knowledge.”

122 | Marijuana Venture // July 2016


Viridian Staffing

GSB Law


California Agriculture:

The Sleeping

GIANT

California’s traditional

agriculture industry could

have a major impact on

cannabis cultivation

By R.W. NAVIS

124 | Marijuana Venture // July 2016


Sixth-generation California farmer

Cannon Michael believes there are

many non-cannabis farmers that

will consider shifting to marijuana

operations in the near future.

www.marijuanaventure.com | 125


For thousands of relatively conservative towns

across the United States, agriculture is the

backbone of the local economy.

But many of these traditional ag hubs, particularly

in California’s Central Valley, face a bleak

financial future if dwindling revenue streams

and tax bases can’t be replaced.

The town of Coalinga, California, was

built on agriculture and oil, the latter of

which is in a protracted bear market. At

one point, city planners thought prisons

might be an answer, but that too has fallen

short of expected revenue.

At the current pace, Coalinga will run

out of money in three years, according to

City Council member Nathan Vosburg.

126 | Marijuana Venture // July 2016


Flower greenhouses could easily

convert to cannabis cultivation if laws

shift in favor of legalization.

55 local jobs and boost local tax revenue

once operations started. The City Council

voted 4-1 in favor of the sale, but there’s

still a sense of urgency regarding the subject

of cannabis. This fall, state residents

will vote on an initiative that would legalize

recreational marijuana for all adults.

“I don’t want us to wait until November

on this,” Coalinga Mayor Ron Ramsey

said. “There are a lot of towns hurting,

and they too will be looking into this.”

The push for cannabis cultivation in

Coalinga is sure to make waves in the

Central Valley — and not just among the

active cannabis community.

Multi-generational farm operators,

especially those with forward-thinking

enterprises, are beginning to ask themselves:

“Why aren’t we going in this direction?”

Many neighboring cities face a similar

predicament.

In January, the Coalinga City Council

shocked locals by approving commercial

cannabis operations. The move initially

prompted backlash from local clergy and

other longtime residents.

The mood seems to have calmed down

as residents have heard from proposed

operators such as Ocean Grown Extracts,

which addressed the council at its meeting

in March. The company has proposed

to buy the vacant Claremont Custody

Center from the city, and turn it into a

77,000-square-foot grow facility. The

professional team from Ocean Grown

Extracts gave a detailed presentation addressing

how the company would add

TRADITIONAL FARM PLANS ENTRY

Bowles Farming Company is a

sixth-generation family farming outfit

based in Merced County, California. It

grows annual crops like tomatoes, melons

and carrots on 11,000 acres. Company

president Cannon Michael keeps a

close eye on cannabis developments and

could begin his own operation by spring

of 2017.

To Michael, “It’s just another crop, and

the customer is always right.”

He sees many advantages for large

farmers in cannabis cultivation. Small

growers may struggle with new state regulations

that have long been enforced for

traditional farmers. Pesticide usage is one

example.

In order to “get a seat at the table,” as

Michael put it, he has been talking to local

dispensaries and county supervisors. If it

is legal and profitable, his company will

do it. He thinks many of his fellow farmers

will follow his lead, depending upon

the age of those running the operations. If

the younger generation is in control, they

will move more quickly.

www.marijuanaventure.com | 127


A view from the hills of Carpinteria, California

gives an indication of the scope commercial ag

could bring to the cannabis industry.

Below: About 20,000 illegal cannabis plants

were thriving California’s ideal growing climate

while being hidden by other agricultural crops in

this photo by the Fresno County Sheriffs Office.


WILL THERE

BE TOO MUCH

CANNABIS

PRODUCED IN

THE YEARS

AHEAD?

LEGACY GROWERS

At a recent Central Coast Greenhouse

Growers Association mixer, some attendees

said they were either already

growing cannabis or planning to. The

potential revenue is just too good to ignore,

they said. Plus, with vast experience

running commercial greenhouses,

they already have many of the necessary

skills.

Adrian Sedlin, CEO of Canndescent,

a Santa Barbara-based craft cultivator,

confirmed this rising interest.

“I got a call last month from an oldline,

large Carpinteria flower grower

who wanted us to partner with him on

growing (cannabis),” Sedlin said. “Unfortunately,

I had to tell him that it was

currently illegal to grow in his town.”

However, the flower industry has a lot

of influence in the city of Carpinteria.

Time will tell whether laws will shift in

favor of allowing marijuana cultivation.

Likewise, many facets of the cannabis

industry seem to be a perfect fit with the

wine business. The various strains are

reviewed similarly to fine wines, and

there are marketing parallels between

the two products.

The skills needed to grow grapes

could be honed for cannabis cultivation,

and the regions where grapes thrive also

fit nicely with cannabis.

So when will the wine industry enter

128 | Marijuana Venture // July 2016

the market? Not anytime soon, says one

expert.

“The O2 license granted to winemakers

is approved by the Department of

Alcoholic Beverage Control,” said Mary

Hitchcock, who has more than 20 years

of experience in the wine business. This

license requires both state and federal

approval, so until federal approval, wineries

in California will not be directly

involved in the cannabis industry, Hitchcock

says.

But grape growers, separate from the

wine industry, could potentially be looking

to convert some of their acreage into

cannabis operations. The impact of traditional

agriculture on the cannabis industry

is likely to be far greater in California

than any other state that has legalized

marijuana.

This leads Michael to ponder: “Will

there be too much cannabis produced in

the years ahead?” MV


Fogco

Pension Builders


Can the small

survive?

As big businesses steadily take over the cannabis industry,

opportunities arise for boutique growers and retailers

― ― ―

By DAVID HODES

At one time, the cannabis industry was one of dedicated

mom-and-pop businesses that would buy

cannabis wholesale and sell it to patients at a dispensary

storefront. It wasn’t that much different

from other retail operations.

But the quaint origins of the industry

have largely disappeared, at least for

now. With retail chains becoming more

prevalent, multi-million-dollar licensing

requirements in some states, and

commercial grow operations churning

out incredible yields, what does the future

look like for boutique cannabusiness

operators?

The pros and cons of cannabis commercialization

have always been an argument

of quality versus quantity. Some

say businesses that specialize and take

advantage of economies of scale can be

more profitable. Others argue that smallbatch,

connoisseur-level producers will

always have a place in the market; the

boutique businesses are prime to come

roaring back, they say.

“There is an absolute gaping hole, in

my opinion, for high-quality cannabis,”

says Jan Carlos Byl, founder and managing

member of MedCanna Consulting

Group. “We are moving toward commercialization

and moving toward an ag

model now.

“That leaves the door open for the

boutique producer, because quality will

always trump volume — in anything,”

he says (although shareholders of companies

like McDonald’s might disagree).

130 | Marijuana Venture // July 2016


AgHeat

Bud Bar



FOR EVERY

MARKET, YOU

HAVE TO PROVIDE

SOMETHING THAT

A CUSTOMER

WANTS, AND THEN

GET BETTER AT

DOING THAT

PDI

CHANGING LANDSCAPE

Bob Morgan, a cannabis industry

consultant and attorney at the Chicago-based

law firm Much Shelist, spearheaded

the Illinois medical cannabis

pilot program. He tracks mergers and

acquisitions activity in the cannabis industry.

Morgan says many of the early

cannabis growers and dispensary owners

are now in the early stages of planning

their exits.

“Ultimately, we are likely to see a mix

of mom-and-pop boutiques that evolve

and mature, and others that entirely cash

out of the labor of love that they have

built,” he says. “State cannabis industries

as old as California and as new

as Illinois will continue to mature and

force boutique shops to further carve out

a niche in the market or form strategic

partnerships.”

At this stage of the industry’s evolution,

there are mergers and acquisitions

happening among licensed cultivation

and retail businesses, and ancillary companies.

“There have already been substantial

acquisitions on the ancillary side, such

as vaporizers, cannabis consulting and

management companies, and edible

brands,” Morgan says. “But the mergers

and acquisitions on the grow and retail

side have just begun.”

He believes many of the investments

taking place now come at a critical time

for the pioneer companies where the

infusion of outside cash — or outright

acquisition — makes sense for both the

buyer and seller.

“Smaller shops looking to survive

consolidations and increasing competition

should give serious thought and

planning to their next steps,” Morgan

says.

Mom-and-pop businesses are not

dead, but they are going to have to adapt

in the long run, says Travis Howard,

general manager and founder of Shift

Cannabis Company, which provides

consulting services to boutique cannabis

businesses.

Howard says the industry, as a whole,

needs the $100 million player in order

to build the business infrastructure to

allow more diversified companies to

succeed.

Financial considerations are the main

reason small businesses have largely

watched from the sidelines or have gotten

into and then back out of the cannabis

industry, he says. It’s expensive to

get into the game, and managing a profitable

grow operation is complicated.

“In Hawaii, you have to have $1.2

million just to submit an application,”

he says. The Aloha State recently selected

eight winning applicants from a

pool of about 60 contenders. (Among

the non-winning applicants were actor

Woody Harrelson and video game pioneer

Henk Rogers.)

Operating a small business still means

a more defined niche that customers can

understand; companies that are small

and don’t provide unique or specialized

products will eventually go out of business,

Howard explains.

“For every market, you have to provide

something that a customer wants,

and then get better at doing that,” he

says.

The broader point Howard makes

about doing business today, and for the

future of a boutique business, is about

listening to the customer, providing specific

products they want, and educating

the customer about both the product and

the company. Modern consumers want

132 | Marijuana Venture // July 2016


Zwart

Peterson Cheese



YOU HAVE A

CHANCE TO

HIRE AND TO

SCALE YOUR

CULTURE WITH

A WORKFORCE

THAT FEELS

COMPELLED TO

CHANGE THE

WORLD

to know why a company is in business,

and how their business affects society

and the environment. The potential for

the boutique model to succeed is, in part,

driven by millennials’ big-picture thinking

about the world, Howard says. They

tend to have a deep sense of distrust, but

believe they can make a difference in the

world, he says.

“They expect their retailer to be authentic,

and give them a sense of community,”

he says. “And that works for

the cannabis boutique employer. You

have a chance to hire and to scale your

culture with a workforce that feels compelled

to change the world. If you don’t

leverage that, you are missing a great opportunity.”

That’s been the methodology used by

artisan beer and food makers, clothing

manufacturers and other companies that

started as small businesses and have

grown quickly. It’s why Kellogg’s bought

Kashi, originally a small health food

maker, and General Mills bought momand-pop

organic snack maker Annie’s

Homegrowns, Howard says.

“They see what is happening in the

overall economy and where the consumer

is moving to,” he says.

There are similarities between the cannabis

and beer industries, where craft

brewers produce more exclusive and

more expensive products. Craft brewers,

such as New Belgium Brewing Company

from Fort Collins, Colorado, began telling

customers their story. They highlighted

sustainable methods and created an “us

versus them” rivalry with the mass-produced

brands like Budweiser and Coors.

Quality was just one of the factors used to

differentiate craft brewers from the multinational

giants.

Smaller businesses — whether they’re

brewing lagers, growing cannabis or

making specialty cupcakes — need to

learn how to promote themselves. Howard

believes people will pay more because

they know and appreciate what

they are paying for.

In cannabis, the multinational giant

simply doesn’t exist — yet. The market

is too new, and federal regulations against

transporting marijuana across state lines

prevent companies from becoming truly

national. But it’s coming, and boutique

business operators are wondering how

much room will be left for them. MV

Hort Services

134 | Marijuana Venture // July 2016


Helderpad

DCG


Safety First

Eliminating workplace hazards is the responsibility of every employee

― ― ―

By ROSALVA CLEVELAND

When it comes to owning or operating a business,

safety should never be compromised.

In the cannabis industry, because of federal

regulations and the largely cash-only

nature of business, it’s even more important

to follow proper safety protocols.

Safety is a wide-ranging subject that

includes well-trained employees who use

appropriate personal protective equipment,

follow company injury and illness

prevention programs, learn how to

prevent workplace violence, understand

indoor air quality levels and take proper

respiratory protection measures.

Safety often begins at the top; if supervisors

work in an unsafe manner, then so

will the employees.

Each state is regulated differently when

it comes to occupational safety. In California,

for example, the Division of Occupational

Safety and Health oversees health

and safety hazards in the workplace.

How can your employees learn to be

safer? The first step is knowing the specific

regulations of your industry. The needs

of an auto repair shop will be different

than a restaurant’s needs. For cannabis

businesses, retail stores have significantly

different safety hazards than a grow operation,

so learning those specific elements

is key. The OSHA-mandated training varies

from industry to industry, so be sure to

follow your industry’s standards.

Another subject of great importance,

particularly for retail stores that are open

to the public, is workplace violence prevention.

Be sure you and your employees

are properly trained. Be aware if someone

at your workplace has a conflict with

another person, particularly if a restraining

order may be issued. Sometimes,

the workplace is a prime location for

violence, simply because the perpetrator

knows when and where the victim can be

found at work.

Business owners should ask their

workers’ compensation insurance carrier

about their experience modification rate

and how that score was determined. This

gives businesses insight into ways they

can lower their insurance rates with a

safer work environment. Many insurance

companies will give discounts to companies

that implement safety training programs

and facility audits.

Rosalva Cleveland is the co-owner and

vice president of Force Field Safety LLC.

She can be reached at rcriskmanagement@gmail.com.

136 | Marijuana Venture // July 2016


Young Electric

GTH Law

WS Packaging


138 | Marijuana Venture // July 2016

Trey Reckling teaches a state-certified

training program that prepares students

to work in the medical marijuana sector.

Under Washington’s new medical

marijuana regulations, retail stores with a

medical endorsement must always have at

least one budtender on staff who is licensed

as a “medical marijuana consultant.”


Led by Trey Reckling, Seattle Central College offers one of two state-approved

medical marijuana training programs in the state

― ― ―

By PATRICK WAGNER

hen Trey Reckling moved to Seattle, he thought he

was leaving behind a career in education to join

the cannabis industry. In the back of his mind, he

wondered what future employers might think about

hiring somebody with marijuana on their resume.

Reckling had spent 15 years at the

Savannah College of Art and Design in

Georgia, where he worked in student

development and conflict resolution,

before moving with his husband to the

Pacific Northwest in 2014.

To his surprise, his career in education

was far from over. He initially

began teaching a course at the University

of Washington on the essentials of

cannabis handling. Not long after, the

state began a highly controversial overhaul

of medical marijuana regulations

that would require dispensaries to be

licensed by the state.

Among the many changes implemented

for dispensaries and patients,

medical marijuana budtenders are now

required to complete a state-certified

training program. According to rules

set forth by the state Department of

Health, marijuana retail stores with

www.marijuanaventure.com | 139


Seattle Central

College, which has

a history of bucking

educational norms,

was recognized for

being one of the top

community colleges

in the nation in 2000.

140 | Marijuana Venture // July 2016

medical endorsements must have at least

one certified “medical marijuana consultant”

on staff at all times.

Reckling, who runs the Academy of

Cannabis Science, began preparing a

proposal for an online certification program

that would meet the state requirements

for medical marijuana training

courses. He reached out to Lisa Babinec,

who is now the director of Seattle Central

College’s continuing education program,

about establishing a partnership

with the school.

Reckling praises Babinec for her willingness

to host the program at an accredited

school.

“Her bravery in all of this can’t be understated,”

Reckling says. “She’s been a

tiger for us.”

Reckling says he was lucky to connect

with Seattle Central for the program because

the school has the willingness and

infrastructure to handle such a program.

“Nothing falls through the cracks, and

to me there’s the joy of studying at an

accredited institution,” Reckling says.

“You’re not off studying in the dark

somewhere.”

Reckling also teaches a class in cannabis

foundations through Seattle Central,

for people who want to learn about the

chemistry, history and medical applications

of marijuana. The four-hour class is

designed as an introduction for medical

marijuana patients, prospective investors

and employees of various cannabis businesses.

Seattle Central had already been running

a distillation program where students

learn about producing spirits.

Reckling says Seattle Central recognizes

the need to train students for careers,

rather than just providing a novelty education.

Reckling designed the medical marijuana

consultant certification program

with an emphasis on student dialogue

and interactions with himself and other

professional lecturers. The 20-hour online

course allows students to complete

required lessons and examinations at

their own pace within the allotted twoweek

time frame.

Reckling also lines up lectures from

local experts, including Nicole Li, a

health care and cannabis lawyer, Dr. Jake

Felice, a naturopath, and Miles Jonard,

head grower of Solstice.

The coursework isn’t just designed

to prepare students for a test, Reckling

says.

“We try to get real, practical applications.”

The program launches at a tumultuous

time for medical marijuana in Washington.

For years, Washington’s medical dispensaries

operated without licenses and

little in the way of regulations. In an effort

to merge the medical and recreational

sectors, lawmakers approved the Cannabis

Patient Protection Act, outlawing


Kennedy

Funding

Alpha Books

Grasshopper Extractor



SOME PATIENTS ARE SCARED

BECAUSE THEY ARE LOSING THE

PLACE WHERE THEY’VE ALWAYS GONE.

THEY’RE LOSING THEIR HOME BASE

unlicensed dispensaries as of July 1. The

legislation sparked outcry from medical

cannabis activists throughout the state,

but it’s unclear if existing unlicensed dispensaries

will be given extensions. As of

mid-June, there were about 260 marijuana

retail stores that had received medical

endorsements.

To account for the additional needs of

medical patients, the state expanded the

cap on marijuana retail stores by 222,

bringing the new total to 556. As of mid-

June, there were less than 320 retail stores

listed as active, according to Liquor and

Cannabis Board records.

Reckling hopes training budtenders for

medical consultations will help quell the

fears of patients who have watched collective

gardens and unlicensed medical

dispensaries be deemed illegal.

“Some patients are scared because

they are losing the place where they’ve

always gone,” he says. “They’re losing

their home base and all the people who

used to work with them. Some places are

lucky and they will get licensed, but others

have to make a new contact and find

new people to trust.”

The medical marijuana training program

syllabus has four peer-reviewed

articles as required reading, and the six

modules covered during the course pull

from more than 80 journals, periodicals

and documentaries, as well as statements

and requirements from the Department

of Health. Students begin the course

with simple lessons in CBD, chronic

pain and the history of marijuana in the

United States, before moving on to more

complex subjects like pharmacology, addiction

and identifying qualifying conditions.

The Seattle Central course is one of

two state-approved training programs for

medical marijuana consultants. The other

is through NGR Enterprises, which offers

an on-site certification program, as opposed

to Reckling’s online course. MV

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LEGAL PAGES

Business partners must

abide by fiduciary principles

What constitutes a breach of contract in a partnership?

By Michele Brooke

Joint ventures and

partnership agreements

occur every

day in the cannabis

world, whether by

a handshake, phone

call, email, deal scribbled

on a napkin or a

formal agreement drafted by an attorney.

Partnerships are the combination of

two or more people to jointly conduct

business. Partners are obligated to share

risks and benefits, and to carry out the

enterprise with the loyalty and care of a

fiduciary. The same fiduciary duty principles

apply to any business venture, including

those in the cannabis space.

It’s not uncommon to see partnerships

begin with great enthusiasm, only to decay

as friction, personality conflicts and

other complications emerge. This sometimes

results in litigation.

Here, we will discuss fiduciary principles

found in two California cases: Leff

v. Gunter (1983) and Agam v. Gavra

(2015).

LESSONS FROM LEFF V. GUNTER

Ted Leff initiated a lawsuit against

his former partners, William Gunter and

others, after they won a government construction

project where Leff was an unsuccessful

bidder.

One of Leff’s causes of action was

unfair competition due to a breach of

fiduciary duty. At the trial, the judge

properly instructed the jury that a business

partner has a duty not to pursue a

business opportunity that competes with

the partnership. This duty not to compete

survives a partner’s withdrawal from the

company. Therefore, the defendant partners

were properly found liable.

From the evidence presented, the jury

may have concluded that the defendants

secretly began an independent bid during

their association with the plaintiff, utilizing,

at least in part, information acquired

by virtue of that participation. After the

defendants withdrew from the joint venture,

they continued to prepare their independent

bid. While their formal bid

apparently did not occur until after their

withdrawal, their conduct was not immunized.

Careful orchestration of their plans

didn’t safeguard the defendants.

This scenario is similar to any number

of transactions that occur within the

emerging commercial cannabis business.

There are three main lessons to take from

the Leff case.

First, partnerships are not just created

by way of a formal partnership agreement.

In the Leff case, the partnership

was recognized despite the parties having

only a written agreement.

Second, partners are trustees for each

other and in all business dealings connected

with the conduct of the partnership

business. Notice the word “trustee”

has “trust” in it, meaning a business

partner has to act in a trustworthy manner

and in the highest good faith to their

co-partners. Therefore, business partners

may not obtain any advantage over their

partners in any kind of partnership business

affair. In other words, they cannot

make even the slightest misrepresentation

about a business affair, conceal important

data or details, threaten the other

partners or engage in any kind of unfair

“arm twisting.”

Third, if a member of a partnership

obtains important information while conducting

partnership business, and this information

is within the scope of the firm’s

business, that partner cannot engage in

self-serving behavior. Any information

obtained by a partner that would be helpful

to the business must be disclosed to

the other partners.

LESSONS FROM AGAM V. GAVRA

In Agam v. Gavra, the parties agreed

to purchase and develop two parcels of

property by constructing houses thereon.

In the end, they ran into multiple financial

and personality conflicts that eroded

their initial plans. Agam eventually filed

a lawsuit against Gavra for breach of

the partnership agreement, and the court

found that Gavra knew or should have

known that the success of the partnership

depended on the construction of houses

for sale. This was the sole goal of the

partnership, as set forth in the partnership

agreement. The court concluded that

Agam had made significant expenditures,

and found that Gavra’s refusal to participate

in construction prevented the partnership

from attaining its goal, leading

to the breach of his fiduciary duties. The

facts also showed that Gavra inflicted adverse

pressure by threatening to default a

key loan if Agam and another partner did

not sign a subsequent contract that essentially

constituted an unfair advantage in

favor of Gavra.

There are three lessons to be learned

from this case. First, substantial evidence

is required to prove a breach of fiduciary

duty. As a marijuana business attorney, it

is not uncommon for disgruntled clients

to complain about their business partners.

It is important to distinguish whether

the other partner has actually breached

some duty.

Second, a partner cannot attempt to

“strong arm” another partner into agreement

on a particular issue for their own

personal benefit.

Third, a partner does not violate his or

her fiduciary duties merely because their

conduct furthers their own interest. The

purpose of this code section is to distinguish

breaches of fiduciary duty, and

provides an excuse to partners from accounting

for incidental benefits obtained

in the course of the partnership activities

without detriment to the partnership.

All cannabis entrepreneurs should

heed the lessons of the Leff and Agam

decisions. Remember, it’s better to avoid

a fiduciary relationship than to be found

in breach thereof.

Michele Brooke is an attorney in California

who practices civil litigation and

civil cannabis law (www.brookelawgroup.

com). She is a member of Americans for

Safe Access, NORML and the American

Herbal Products Association.

144 | Marijuana Venture // July 2016


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LEGAL PAGES

Using creative financing to

avoid residency requirements

Convertible notes and SAFEs are two options for businesses

By Lauren Rudick

Last year, Colorado

passed House Bill

15-1379, formally allowing

out-of-state financiers

to fund marijuana

establishments

through unsecured

convertible notes,

warrants and options. Cash-strapped

startups in the industry were relieved.

Residency requirements protect against

“Big Marijuana” and helps prevent cannabis

dollars from moving across state

lines, but they constitute a significant

impediment to fundraising that is unparalleled

in other industries.

Colorado’s law did not receive extensive

press attention, perhaps because it legitimized

a practice that savvy startups and

investors had already been using in Colorado

and Oregon (before restrictions on

out-of-state investment were lifted).

However, those entrepreneurs who

were late to the party (or perhaps lack

access to creative and sophisticated legal

counsel) still view residency requirements

as entirely prohibitive to out-of-state investment.

To clarify, in carefully crafted

situations, convertible notes and SAFEs

(simple agreements for future equity) can

be used to raise out-of-state capital without

violating residency requirements or

the Cole Memorandum.

CONVERTIBLE NOTES

Convertible notes are akin to promissory

notes (loans with interest, payable on or

before a maturity date), but also provide

the investor/lender with options to convert

the debt into equity (typically preferred

stock) of the company/borrower. Common

“conversion events” include:

• The loan remains outstanding upon

the maturity date;

• The company raises a certain amount

of capital in a priced equity round (a

“qualified financing”);

• A sale of the company;

• A “change in control” of the company

(such as changes in effective control,

ownership or a sale of all or a majority of

the company’s assets).

Cannabis investors may cash in on their

equity in compliance with residency requirements

only upon the earlier of: establishing

residency for the requisite period of

time within the state in which the company

is located; a regulatory shift eliminating any

applicable residency requirements; and/or

sale of the note to a buyer who meets the

residency requirements.

Conversion frequently includes a discount

(averaging 15-25%) on the price

of stock to the future round of financing.

Suppose the company were to raise

$500,000 in convertible debt with a 20%

discount to the next round. Upon a subsequent

qualified financing of $1 million at

$1 per share, convertible noteholders will

get 625,000 shares for their $500,000.

This rewards early-stage investors for

their foresight and risk.

Startups can further sweeten convertible

notes for investors by using, among

other things:

• Valuation caps (thus protecting

against shareholder dilution upon a future

capital raise);

• A premium upon a sale of the company

(frequently double the amount of the loan);

• Most-favored-nation clauses, allowing

investors to benefit from future investors’

terms that are more favorable than

their own terms;

• Limitations on pre-payment, such as

requiring the majority vote approval of

existing noteholders.

In some circumstances, startups that

have a variety of assets, such as intellectual

property, equipment or land, may secure or

collateralize the note, giving the investor

protection against default on the underlying

loan. Notes appear as long-term liabilities

on the company’s balance sheet.

SAFES

SAFEs are similar to convertible notes,

as they allow investors to convert their investment

into equity at some future point

(when residency requirements are moot).

Unlike convertible notes, SAFEs are not

classified as debt, SAFE holders are not

creditors and there is no maturity date or

interest rate. Instead, SAFE holders get a

warrant that can be exercised if the company

is acquired, raises investment capital

or goes public.

SAFE agreements are short — roughly

five pages — and terms are standardized,

leaving little to negotiate aside from the

valuation cap. Thus, startups can save significant

transaction costs. Tom Quigley,

cannabis investor, advocate and CEO of

the Gluu, a wholesale distribution platform

for cannabis culture and wellness

products, encourages cannabis startups

and investors to utilize SAFEs, noting

that “time is money … and debating valuations

can limit growth.”

Because investors may wait indefinitely

for an exit, SAFEs cannot be flipped, thereby

assuring investors’ long-term loyalty

and commitment to the company’s growth

(as appropriate for early-stage investors).

Upon qualified financing, SAFE holders

automatically receive a number of

preferred shares based upon the valuation

cap, as opposed to a number of preferred

shares based upon a higher pre-money

valuation. While it may seem that SAFEs

are predominately founder-friendly, investors

are entitled to pro-rata rights of

participation in future financing rounds.

Startups should consider including a

threshold, because these rights are automatic

for every SAFE investor.

Clearly, states are trending against residency

requirements. For instance, Colorado

and Oregon have paved a clear path for

out-of-state lenders and investors, respectively.

Washington officials are considering

allowing out-of-state lending and whether

to allow out-of-state minority ownership of

marijuana licenses. And for those startups

and investors who cannot wait, there are

creative deals to be made in the meantime.

Lauren Rudick represents investors and

startup organizations in all aspects of business

and intellectual property law, specializing

in cannabis, media and technology.

Her law firm, Hiller, PC, is a white-shoe

boutique firm with a track record for success,

handling sophisticated legal matters

that include business and corporate law.

146 | Marijuana Venture // July 2016


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LEGAL PAGES

Is your medical dispensary

covered by HIPAA?

It might be smart to bring your business into compliance

By Hanan B. Kolko

The Health Insurance

Portability

and Accountability

Act of 1996 (HIPAA)

is a federal law that

forbids disclosure of

protected health information

(PHI), and

requires entities to take specific steps to

ensure security of PHI. Since HIPAA was

enacted, the U.S. Department of Health

and Human Services has issued regulations

describing in detail what a “covered

entity” must do to protect PHI.

There are several important definitions

to understand in order to determine

whether your dispensary is subject to

HIPAA.

HIPAA regulations define a covered

entity to include a “health care provider

who transmits any health information

in electronic form in connection with a

[covered] transaction.”

A “health care provider” is any person

or organization that furnishes or is paid

for “care, services, or supplies related to

the health of an individual.” Since dispensaries

provide medical marijuana in order

to treat illnesses, they are almost certainly

“health care providers” as that term is defined

according to HIPAA.

As health care providers, dispensaries

may be subject to HIPAA if they transmit

any health information in electronic form

in connection with a covered transaction.

HIPAA regulations define “health information”

as any information that “relates

to the past, present, or future physical or

mental health or condition of an individual;

the provision of health care to an individual;

or the past, present, or future payment

for the provision of health care to

an individual.” Based on that definition,

most dispensaries have HIPAA health information.

In fact, depending on the medical

marijuana regulations in each state,

dispensaries may be required to maintain

health information data and provide that

information to state regulators.

Even if they meet the previous definitions,

medical marijuana dispensaries

are typically not subject to HIPAA unless

they electronically transmit health

information in connection with “covered

transactions” specified in the HIPAA

regulations.

Under those regulations, “covered

transactions” include: requests to obtain

payment from a health insurance plan

and the exchange of information in connection

with such a request; inquiries to


a

YOUR PATIENTS

CARE ABOUT

THE PRIVACY

OF THEIR

RECORDS AND

EXPECT YOUR

DISPENSARY TO

MAINTAIN THE

PRIVACY

health insurance plan to determine whether

an individual is eligible for coverage

under that plan and to determine benefits

associated with that plan, as well as the

health plan’s response to such inquiries;

requests to obtain authorization to refer

a person to another health care provider;

the electronic transmission of payment

for health care services from a health

insurance plan to a health care provider

or the provider’s financial institution, as

well as the transmission of information

concerning that payment.

At this time, most insurers do not cover

medical marijuana, so dispensaries

are not likely to be electronically transmitting

health information in connection

with transactions that would subject them

to HIPAA. However, if a dispensary does

send or receive information electronically

in connection to receiving payment from

a health insurer, or to determine the eligibility

of a patient for health insurance, it

is likely to be covered by HIPAA.

Dispensaries covered by HIPAA may

not disclose PHI unless that disclosure

is either authorized by the patient or authorized

by HIPAA regulations. The regulations

authorize limited use of such

information in connection with providing

treatment and obtaining payment for services.

In addition, HIPAA Security Standards

require businesses covered by HI-

PAA to develop and implement stringent

safeguards for PHI.

HIPAA’s privacy requirements are enforced

by the Department of Health and

Human Services Office of Civil Rights,

which has the power to impose penalties

for violations of HIPAA’s privacy protections.

Those penalties can range from

$100 to $50,000 per violation.

Even if your dispensary is not currently

covered by HIPAA, you may want to

consider gradually bringing it into compliance

for several reasons. First, as the

industry matures and insurers begin covering

medical marijuana, you’ll have to

engage in HIPAA-covered transactions

with your patients’ insurers, so it makes

sense to prepare for that now. Second,

your patients care about the privacy of

their records and expect your dispensary

to maintain the privacy of those records.

Finally, the cannabis industry benefits

when businesses demonstrate that they

“play by the rules,” and complying with

HIPAA is one way to do that.

Hanan B. Kolko, a member of Meyer,

Suozzi, English & Klein, P.C., is cochair

of the firm’s Cannabis Practice

Group. He is also a member of the National

Cannabis Bar Association and its

Amicus Committee, and has presented

continuing legal education programs on

cannabis-related topics, including the

ethics of representing cannabis clients,

employment issues in the cannabis industry,

cannabis businesses and access to

bankruptcy courts, and how the interplay

between federal and state laws impacts

the cannabis industry.

148 | Marijuana Venture // July 2016


Solar Buddy

Shirreff

Insurance

Svensson


MJ Business

Conference


SWCC San Diego


M A R I J U A N A

VENTURE

Interchange 2016

is proud to present

2016

Meet with 20+ licensed marijuana retailers at the

INTERCHANGE

Renton Pavilion, Renton, Washington • June 22-23, 2016

This is not another

typical ‘trade show’

• This event is a buy/sell meeting for

vendors to meet with qualified buyers.

• Industry only. No public. Interchange is

for professionals in Washington’s legal,

recreational marijuana industry.

• Each vendor will have 15-20 one-on-one

meetings over a two day period with retail

buyers from around the state.

• Vendors and buyers will be provided

breakfast and lunch.

TaraBabette@gmail.com | GJames@Topics-Ent.com | 425.656.3621


P.O.V.

P.O.V.

is a monthly section in Marijuana

Venture showing images of operational cannabis

businesses throughout the U.S. and Canada.

To submit photos for consideration in future

issues email: Editor@marijuanaventure.com.

Marijuana Venture

publisher Greg

James (above

left) shakes hands

with Washington

Governor Jay Inslee,

while sales manager

Lisa Smith poses

for a photo with

U.S. Senator Patty

Murray (far left).

James and Smith

recently had lunches

with the governor

and senator to

discuss economic

issues in the state of

Washington. Photos

courtesy Greg

James.

www.marijuanaventure.com | 153


P.O.V.

One little leg injury isn’t enough to keep Emily Walter, national sales manager for Nanolux, off the sales

floor at the Marijuana Business Conference in Orlando. Photo by Patrick Wagner.

Extraction masters at Apeks Supercritical answer attendee questions in

Orlando (above), while Pope Scientific displays its molecular distillation

technology. Photos by Patrick Wagner.

154 | Marijuana Venture // July 2016


Jason Cramer (right) and

Kassandra Nienaber display

a few copies of Marijuana

Venture at Buddy’s, the newest

marijuana retail store in Renton,

Washington. Photo by Adam Wik.

Will Smith of Bud Bar Displays took his next-level dispensary

solutions to the Southeast for the Marijuana Business Conference

in Orlando. Photo by Patrick Wagner.

Showcasing its expertise in lighting, pest management, irrigation and water treatment, Urban-gro had a prime

location at the Marijuana Business Conference in Orlando. Photo by Patrick Wagner.

www.marijuanaventure.com | 155


P.O.V.

Promotional photos of Eugreen Organics’ Blackberry Kush. Photo by Michael Caley.

The team at San Diego Healing Center (from left to right)

Michelle, Tom, Matt and Dr. Bee. Photo courtesy San

Diego Healing Center.

Master journalist Patrick Wagner manages

to put the Playstation controller down

long enough to snap a selfie inside one of

Soulshine’s growrooms.

156 | Marijuana Venture // July 2016


Weed

TraQR

Flying Skull

OBC Northwest

www.marijuanaventure.com | 157


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MARIJUANA VENTURE ADVERTISER DIRECTORY

Business Intelligence

Cannabis Benchmarks......................111

Front Runner .....................................51

Consulting/education

Business Operations Guide ..............101

Clean Green Certified ......................147

Denver Consulting Group ...................15

The Grow Expert ................................50

Contractors

Dear Electric ......................................49

Young Electric ..................................137

Distributors

Green Thumb Industries ....................16

Groco Supply .....................................95

Hydrobuilder .....................................59

Vital Garden Supply ...........................96

Employment Services

Viridian Staffing ...............................123

Events

CWCB Expo ........................................82

Imperious Cannabis Business Expo ....29

Interchange 2016 ..................... 152, 154

MJ Business Conference ..................150

SWCC San Diego ..............................151

Financial Services

ZMS Financial ....................................26

Greenhouses

FarmTek ............................................87

Hort Services ...................................134

Next G3N .........................................161

Nexus ................................................63

OBC Northwest ................................157

Rough Brothers, Inc. ..........................11

Slip Tube..........................................143

Growing equipment/services

AgHeat ............................................131

Air-Pot .............................................115

BOLD Light Deprivation .....................25

Fogco ...............................................129

GeoPot ............................................103

Green Thumb Industries ....................16

Harvest Excel ...................................147

HydroLogic ......................................... 4

KES Science .......................................19

O2 Grow ..........................................158

Svensson .........................................149

Zwart Systems .................................133

Heating/cooling

AT Foam ..........................................147

Insurance

CannaBiz Insure ...............................158

Crimson Insurance .............................33

PCI ...................................................132

Pension Builders ..............................129

Shirreff Insurance ............................149

Investment Opportunities

For Sale: Elma Airport ........................66

For Sale: T-1 Producer/Processor .....102

Regency Group, Inc ..........................158

Titan Clearinghouse .........................143

Legal

Crew Consulting ................................39

Gordon Thomas Honeywell Law ......137

GSB Law ..........................................123

Lighting/electrical supplies

Bios Lighting ......................................10

Forever Green Indoors .......................91

Groco Supply .....................................95

Kind LED ............................................57

Nanolux Technology ........................... 1

NCWGS ..............................................97

Solar Buddy .....................................149

Machinery

Across International ........................162

Centurion Pro ....................................27

CoolJarz .............................................72

Eden Labs ..........................................55

Friendly Farms ......................................

Futurola ............................................67

Grasshopper Extractor .....................141

GreenBroz .........................................47

Helderpad .......................................135

Root Sciences ....................................37

Rosin Press Kings .............................106

Terpp Extractions .............................121

Trimpro .............................................93

Twister Trimmer ................................75

VC999 ................................................. 7

Zoom Technologies ............................43

Marijuana retail

Clear Choice Cannabis .......................35

Misc.

Alpha Books ....................................141

Dash Hemp ........................................83

Peterson Cheese ..............................133

Packaging

Cannaline ..........................................20

CoolJarz .............................................72

DCG One ..........................................135

Kush Bottles ......................................77

Maverick Label ..................................92

VC999 ................................................. 7

Vessel Verde ....................................... 3

WS Packaging ..................................137

Paraphernalia

Vaporous Technologies ......................89

Producer/processors

Blue Roots .......................................145

CannaSol Farms ...............................113

Clarity Farms .....................................41

Interra Oils ........................................45

Northwest Cannabis Solutions ...........61

Northwest Harvesting Co .................119

Walden Cannabis ................................ 9

Retail services/equipment

Bud Bar Displays ..............................131

Portland Store Fixtures ....................112

Security

Campbell Nelson ...............................28

CCTV Dynamics ..................................31

High Quality Security Walls ..............145

Salient Systems .................................13

Statewide Security ...........................142

Soil/nutrients/pesticides

Flying Skull ......................................157

Growth Products ...............................79

North County Distributors ...............145

Plant Success .....................................23

Rx Green Solutions ............................65

West Coast Horticulture ..................... 5

Testing Labs

Confidence Analytics .........................81

Medicine Creek .................................. 2

Tracking

Weed TraQR ....................................157

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www.marijuanaventure.com | 159


Bud Scores

Three experienced bud tasters sample two different products each month. The test is done completely blind. There

are no visual cues; no information is relayed regarding the origin of the product or any other factors that might

influence the testers. At Marijuana Venture, we believe blind testing is the only way to get a truly honest score.

Each of our testers has been asked to rate a bud sample on five factors: smell, taste, texture (or cure), how it

smokes and overall appeal. Each category is rated on a scale of 1-100, with 100 being a perfect score. The results

of the five categories for each tester are averaged to determine the Bud Score. We deliberately did not include

the effect or the “high” in the rating, because we chose to mirror blind tastings in the wine, cigar and spirits

businesses. Each Bud Score is determined according to personal appeal and taste, rather than potency. Each

sample was purchased at a Washington state-licensed cannabis retail store.

Brand: U.S. Cannabis

Strain: Grand Daddy Purple

Total THC: 26.0%

Grow type: Indoor indica

Brand: Tiller/NCW Grow

Strain: Cactus

Total THC: 20.6%

Grow type: Outdoor sativa

87.0 82.9

CORRECTION:

The June 2016 issue

of Marijuana Venture

incorrectly labeled one

of the strains sampled

in the Bud Scores

section. The Pioneer

Nuggets Afgoo is an

indoor-grown indica.

ARCHIVES BUD SCORE TOTAL THC GROW/TYPE ISSUE

Green Barn Farms Super Skunk 81.4 28.6% Outdoor indica hybrid April 2016

Phat Panda OG Chem 83.7 15.3% Indoor sativa hybrid April 2016

Pioneer Nuggets Afgoo 82.5 21.0% Indoor indica May 2016

Pingston Creek Durban Poison 87.6 17.8% Indoor sativa hybrid May 2016

Secret Gardens of Washington Gas Mask 87.4 21.6% Indoor indica June 2016

Tiller/Flying Farma Dirty Girl 84.2 21.4% Outdoor sativa June 2016

Joy Beckerman is a renowned industrial

hemp and marijuana consultant and

policy maven who has been involved in

both movements for more than a quarter

of a century. She judged her first High

Times Cannabis Cup in Amsterdam in

1995, and enjoyed her most recent High

Times Cannabis Cup judging in SoCal

in 2015 before a wide variety of duties

overwhelmed her cannacalendar.

Adam Wik is a Pacific Northwest native,

who has a love for all things cannabis.

He’s worked for several different

companies in the cannabis industry,

including sales for Marijuana Venture. A

mad scientist of sorts, Adam really enjoys

learning about and understanding strain

genetics, terpene profiles and the effects

they have on the mind and body. He also

enjoys long walks to the refrigerator.

Tera Martin is the founder of the Pink

Gene Foundation and general manager

of Green-Theory, a marijuana retail store

in Bellevue, Washington. She studied

hospitality management at Washington

State University, and was introduced

to the cannabis industry after being

diagnosed with breast cancer. Cannabis

was a part of her treatment program,

which led her to become an activist.

160 | Marijuana Venture // July 2016


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