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Sundie Seefried, President & CEO of Safe Harbor Financial

A Q&A with Sundie Seefried, President & CEO of Safe Harbor Financial

By Cannabis Industry Journal Staff
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Sundie Seefried, President & CEO of Safe Harbor Financial

As the former CEO of Partner Colorado Credit Union (PCCU), Sundie Seefried has been in the credit union space for 39 years. Established in 2015, Safe Harbor Financial is now a leading provider for banking and financial services in the cannabis industry.

Seefried founded Safe Harbor as a cannabis banking program for PCCU, and since then it has withstood scrutiny of 16 separate federal and state exams. Entering its ninth year as a cannabis banking program, they have almost 600 accounts in 20 states and have processed over $14 billion in transactions for the cannabis market. In September, Safe Harbor began trading on Nasdaq under the symbol SHFS. The company has also announced a definitive agreement to acquire Abaca, an industry-leading cannabis financial technology platform.

Seefried has seen it all in the cannabis banking world. We wanted to get her thoughts on some current events, the future of cannabis banking and lending, and what the next few years might hold in store for an industry ready to grow.

Cannabis Industry Journal: Tell us a bit about yourself. What is your background and how did you find yourself in the cannabis industry? How did you get to become president and CEO of SHF?

Sundie Seefried, President & CEO of Safe Harbor Financial

Sundie Seefried: I’ve been in banking in the credit union space since 1983. I became CEO of Partner Colorado Credit Union in 2001 and stayed there for 21 years. Everything I do, I have a very conservative nature just from being in the banking world and doing things methodically and building good foundations that endure long term. In 2014 when FinCen issued guidance, I was supposed to retire, and I had dinner with some old friends that were attorneys who couldn’t get bank accounts for their clients in the cannabis industry. They asked me to help and I looked into it for them. I assumed the regulator would shut me down but he didn’t; he actually encouraged me to move forward and look further into things. As I educated the board, we saw just how unsafe Colorado was and the serious need for the community to figure things out with respect to banking and cannabis. Coming from that credit union perspective, I said I think we can do this, let’s try and I’ll go through the third parties necessary. And that’s how we got into this, just looking to try and help solve Colorado’s problems and get banking access for cannabis companies. 

CIJ: Tell me about your company’s mission. What is your financing strategy in cannabis and of the companies you do business with, what do you look for most?

Seefried: Our mission remains the same, and that is to normalize banking in the cannabis industry as much as possible. Because the black market still exists, the issue becomes sorting the legal entities out from the illicit actors in the industry. We know that the illicit market is trying to hide amongst the legal environment, which really makes things difficult for upstanding cannabis businesses. We can normalize banking by making sure we help legitimize the compliant entities and sort out the bad actors. We really only want to work with legitimate players with licenses, who are fulfilling expectations on the regulatory level and have no problems with compliance. We have been able to do that on the depository side.

We have always been a low-cost provider and our clients count on that. As we move into the lending part of the industry, we’re looking to do the same thing. There are lenders who charge one-to-three percent per month, 18 to 36 percent per year. We, on the other hand, are targeting more of an eight to thirteen percent annual rate. More of a conservative approach. Real debt underwriting. No extremely high interest rates. We look for the collateral, we look for well-organized businesses and solid documentation. Those are the businesses we are trying to bring into the fold and offer them normal loans. Cannabis will always have a premium on it simply because it is illegal at the federal level and there are additional hoops we have to jump through. Because of the potential forfeiture and seizure, if there are bad actors, etc., it really behooves any clients coming to us to also place their depositary services with us so we can prove their legitimacy and provide loans to them.

CIJ: Let’s talk about the Canopy Growth news. They announced they are pulling the trigger on acquiring Wana Brands, Acreage Holdings and Jetty Extracts, under the Canopy USA holding company and ahead of federal legalization. On the surface, it looks like they are bypassing a lot of the hurdles American cannabis companies currently face with financial red tape. As a foreign company trading on the NASDAQ dealing with a schedule 1 substance, do you expect Canopy to have a significant, some would say unfair, competitive advantage with their early entry? Or is this perhaps more of a rising tide lifting all boats scenario? What effect will this have on the current market landscape?

Seefried: I find it a very interesting move on their part. Certainly, they have a big advantage in comparison to other companies. The consolidation in the industry is moving so quickly. Other players will keep up with this just as fast as Canopy is moving in. That’s my opinion in terms of what I see in the consolidation area of the market. I think what it really hurts is small businesses. My heart goes out to them. So many of them worked so many years to build excellent small companies with boutique shops, and this whole move will really change that part of the industry.

I see a lot of these small players, non-vertically integrated companies, being impacted in a negative way due to such mass consolidation and the entry of foreign businesses. We need to get more competitive on a global level in order for our companies to grow and thrive. This happened back in 2018, when so many companies started doing those reverse takeovers onto the Canadian Securities Exchange and suddenly, they were putting tens of millions of dollars into the U.S. market. People didn’t see that as a competitive disadvantage for American companies, but now this move by Canopy may really show that we have to look at things more globally.

CIJ: Biden’s announcement regarding the scheduling review for cannabis has a lot of industry folks very hopeful that federal legalization is closer to a reality than before. Do you share their optimism?

Seefried: Closer than before, yes. But how close? I am not convinced it will happen quickly. If they are really going to consider rescheduling or descheduling, everything happens in Washington very incrementally. Eight years and seven attempts at the SAFE Banking legislation and still no movement on that front. Tomorrow, we’re going straight to legalization? I have a hard time swallowing that one. I just don’t see that big of a jump all at once. I think it is interesting coming just before the midterms and votes are really needed now more than ever.

What Biden did was a great start. Especially for those people in prison for possession. The interesting part of it is, we are very serious about people who have used it, but the people who have sold it and are in prison might be in the same situation. Given how the laws worked for so long, just based on the amount of cannabis you had could get you automatically labeled as a dealer, which isn’t the case for a lot of incarcerated folks.

The fact is, the social equity and justice issue, who do you free or who do you not free from prison, is a very difficult issue to get through. I think it is a great step forward and it will help some people who were treated unjustly, but there is still a lot of work to be done.

“I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.”As far as rescheduling, if they go from a Schedule I drug to a Schedule II drug, that will do no good, but it certainly is a bone to throw to the industry if you want to look like you are making some progress. Schedule II is still subject to 280E tax code so it will only do so much. If they want to make things more equitable and actually level the playing field, they have to do something about the 280E issue hindering every cannabis business in the country.

As far as full legalization, I am not optimistic because of all the players that need to be involved. Full legalization will require a change to the IRS tax code 280E as well as other tax issues. I think there are too many players: The DOJ, FinCen, the DEA, the FDA, the IRS. All of these agencies will have to agree on full legalization and moving forward in unison. The DEA is trying to fight illicit actors and illicit drugs. FinCen is trying to follow the money to find illicit actors. As long as there is an illicit market it will make their job tough, and on top of all of that, we have politics in play. That is just my take on legalization. It is going to be a much more complex problem than just legalizing the plant and moving on. Rescheduling seems like lower hanging fruit, but they will have to move it higher than a Schedule II.

CIJ: With the midterm elections here, there are a number of legalization measures in a handful of states, along with political control of Congress on the ballot. How do you think a Republican or Democrat controlled Congress will affect cannabis legalization progress?

Seefried: I just finished doing some lobbying in September in DC and spoke to some Senator offices in person, and I heard a lot of interesting topics being discussed. One of the things that keeps popping up is that social equity and justice is a huge issue. If we can’t solve this injustice in our system that has been going on for decades and decades, maybe they’ll hold banking legislation hostage. You can’t correct 50-60 years with one piece of legislation. Everything has to be incremental, unfortunately, so there will be some give and take there. I think that was a primary focus, especially with the Democrats and I do think it is a worthy cause.

On the Republican side, economically improving our competitive advantage as a country. They are starting to see the jobs being created and the tax revenue coming in and the growth of the industry. They will have to make that decision at some point in time whether they are going to leave the American cannabis industry behind or allow them to compete on a global level. I really think everything will move slowly and continue as it has happened in the past.

I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.

CIJ: As we inch closer to 2023, what do you expect the next year to offer for the cannabis financing market?

Seefried: I would say, with or without legislation, they’re finding greater access to banking. And the reason they are getting better access to banking is because none of us have been prosecuted for simply engaging in cannabis banking. I think we have set a precedent over the past eight years, not only us but other service providers in the industry and that we are not being prosecuted.

I see more financial institutions entering the market slowly. The second reason access to capital and banking will increase is because every financial institution in the country wants that lending relationship. In order to get there, they want to start with the depository relationship, and they don’t want smaller players presently doing it and getting all of those relationships before they enter the market. I think the competitive nature of the financial industry to land that lending relationship is going to force them into the game sooner than later.

Election Results for Cannabis: MD, MO Vote to Legalize

By Cannabis Industry Journal Staff
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Election Day in 2022 has come and gone and as the dust settles, it looks like voters favored cannabis legalization in some states, but failed to pass muster with other key ballot initiatives. While we wait to see the final tallies for which party will gain congressional power in the United States, we can safely call the cannabis legalization ballot initiatives.

In Maryland, voters overwhelmingly passed a legislatively-referred ballot question to legalize cannabis for adults. Question 4 passed with a clear 65.5% margin. The General Assembly gets to decide a sales tax rate for all cannabis sales following the question’s approval.

With 89% of the votes reported, Missouri’s Amendment 3 appears to have passed muster with a 53.1% margin. Amendment 3 legalizes cannabis for adults and sets a 6% sales tax rate. Notably, it also expunges convictions non-violent cannabis-related offenses.

According to the Marijuana Policy Project and the Associated Press, ballot initiatives to legalize adult use cannabis in Arkansas, North Dakota and South Dakota have all failed.

Arkansas’s Issue 4, which would have legalized adult use cannabis and instated a 10% cannabis sales tax, lost by well over 100,000 votes. With 95% of the votes being reported, it appears that only 45.1% of voters in North Dakota backed cannabis legalization. South Dakota’s population struck down cannabis legalization with a 52.9% majority.

The 3-Legged Stool of Successful Grow Operations: Climate, Cultivation & Genetics – Part 2

By Phil Gibson
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This is Part 2 in The 3-Legged Stool of Successful Grow Operations series. Click here to read Part 1 and stay tuned for Part 3 coming next week.

Aeroponic and hydroponic systems use zero-soil, so water is effectively our media and our transport mechanism for nutrition. Ideally, you start with clean, fresh water with “nothing” in it. Nothing in this case means no heavy metals, pesticides, bacteria or pathogens. There are some scary words in there so let’s talk through the best ways to get to “nothing.”

The first place to start is by testing your source water, whether it is surface, well or municipal water. This will give you an initial idea of how “empty” your water is. Water supplies shift over time, so it is also a very important input to monitor over time with annual or bi-annual testing. Clean water is the essence of success for aeroponics and a great way to lower your cost of production. With proper design and management, you can recycle and reuse 95%+ of the water you draw into your facility.

Reverse Osmosis (RO)

Mothers to clones: Happy clones, it’s all about the water

RO is the most common way to clear your incoming water. The process uses pressure filtration by forcing your water through a series of filters or meshes that block or extract large particles, organics and metals. Normally this is 98%-99% efficient. These systems do require attention and maintenance as they do have filters that are required to be changed regularly depending on the clarity of your original water source and the type of material filtered. This accomplishes a lot of your water clearing process to empty the balloon, but it does not clear the pesky biologicals or pathogens. RO is covered in detail in our “You are what you drink” webinar so look that over for a deeper explanation. There are a wide range of relatively low-cost suppliers based on capacity and filtration efficiency. From an operations standpoint, the key is to understand the filter replacement cycle and cost of replacement.

Ultraviolet Light (UV)

UV light can be used to clear organics and pathogens from water. The primary use is to clear origin water but it is also especially important for recovered water that you save from the humidity in your grow rooms. More on this below. One has to be cautious about the use of UV light. It will cause sunburn and eye damage with exposure so handle this resource with care. After RO & UV treatment, input water should be an empty balloon ready for the addition of your perfect nutrient salt recipe. There are a wide range of low-cost UV lighting solution suppliers from which to choose and they are easy to find.

Dehumidification & Recovery (DEHU)

Early root follicles: Reaching for first nutrients

The number one way to conserve water in an accelerated growth aeroponic grow room is to recapture the humidity that is transpired into the air as the plants grow. While DEHU water is effectively distilled water (or clear of particulates), it can be full of healthy little bacteria or pathogens than may be transported through air or residing in the equipment filters. Clearing these with UV light normally makes this water directly reusable in your fertigation systems. Not all dehumidifiers are perfect. Some metals used in their construction can leach into the recovered water, so this is worth a deeper look as you create your complete water system. Air treatment suppliers are covered in Part 1 of this series.

Used Fertigation Water, or “Flush”

At the start of the flower cycle, take your clean water (the empty balloon) and add your perfect nutrient salt flower recipe and deliver it to your plants. Over the grow cycle from flower to harvest, your plants will use portions of your nutrients and your balloon contents will drift from your target recipe you’re your desired cycle, clear or flush your reservoirs and reset your recipe by refilling your balloon to your exact targets. The exiting nutrient-rich “flush” water can also be recycled into your source water feed since the salts and metals present can be cleared from the mixture through the same RO process that your source water goes through. The end result is perfectly good recycled water savings.

Oxygen Reduction Potential (ORP)

Healthy roots reach for water: Early veg when plants get rolling

ORP is a measurement of an oxidizing agent. Oxidizing solutions are a common and inexpensive method of disinfecting water before and during use in hydroponic systems. Oxidizers can be used to monitor and deal with the “cleanliness” of a nutrient water solution while it is in use. Several oxidizing agents exist with the most common being: hydrogen peroxide, chlorine, ozone and chlorine dioxide. The characteristics of each of these agents and how they interact with the organic matter in solutions is different. The ideal concentrations to use in each situation to kill or control pathogens is unique and one of the topics covered by our “Letters from the AEssenseGrows plant science team” on our website. That deep dive is the subject of another paper.

When you take all of these subjects together and they are done right, you should be able to recycle 95% of your source water with a professional water treatment & recycling system.

Here, I would like highlight the ultimate water hero: Ashley Hubbard, director of cultivation at RAIR Cannabis. For a quick tour of her water treatment and recovery room, see here. No one that I know manages water better than RAIR Cannabis and Ashley leads the team there.

To download the complete guide and get to the beef quickly, please request the complete white paper Top Quality Cultivation Facilities here.

Stay tuned for Part 3 coming next week where we’ll discuss The Right Build Out.

The 3-Legged Stool of Successful Grow Operations: Climate, Cultivation & Genetics – Part 1

By Chris Wrenn, Phil Gibson
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Ideal cannabis profits come from high demand/high selling prices and low production costs. The spread between those two, or margin, can determine the life or death of your business. We want to share this series of articles so that your next investment can be highly successful and high margin out-of-the-box.

Regardless of the grow method (soil, coco, rockwool, hydro or aero), every plant performs best in its own ideal environmental conditions. Experienced growers gained success through hard work, and just that, experience. Many have tried more advanced grow technologies, but shied away due to early trial failures or the complexity of maintaining chemistry across a grow facility. The wonderful thing now is that precision sensors and software controls eliminate the risk to robust healthy plants and harvest success. Growers are now able to both manage production while performing research in line with their operations.

We have learned a great deal working with our grow partners over the last 6 years. Every grow facility and location are different due to local weather, business environment and scale. This series of articles and guide, authored by our expert, Christopher Wrenn, will include recommendations of the most successful approaches we have seen here in North America and all over the world.

A 4-Layer fully aeroponic flower room using movable racking systems

Building top-quality cultivation facilities is no simple task. Cultivators are also looking for new help as they shift from older soil or media approaches to more efficient grow methods. One powerful method is aeroponics, which is very good at growing any type of plant in air in a sterile environment, with labor, nutrient and water savings.

Where possible, we will share key vendors that support healthy grow operations and (since it is World Series Time), customer examples that are knocking it out of the park. In today’s competitive business environment, it is critical to do what we can to increase profitability and survival in the face of steep headwinds. We want you to crush it and be “the last man standing.”

So, let’s get to it.

Climate: Environmental Control

We begin with a critical leg in your environment. The process of photosynthesis is more than just light, plant and moisture. We want to do more than just grow plants. We want to grow highly profitable plants. That means we have to accelerate photosynthesis so we are growing faster, bigger and more potent than our competitors.

The Vapor Pressure Deficit (VPD) is the amount of “drying power” available in the air surrounding your plants. This is a useful way to understand the amount of moisture your atmosphere can remove from your plants as they digest carbon dioxide and aspirate water and oxygen into the air around your plants. A higher vapor deficit is a good thing for growth; It is also a measurement of how much nutrient you can uptake into the plant roots and convert into size and potency in the canopy. We recommend that you have resources in your grow rooms to maintain your environment to within 5% of both your humidity and temperature targets for ideal results.

Onyx Agronomics is a Tier 3 indoor cultivator in the State of Washington. This is the canopy in one of their 8 flower rooms.

In our Top Quality Cultivation Facility white paper, we review environmental settings for temperature and humidity for mother, clone/veg and flower rooms for day and night light cycles from early cuttings through to end of harvest flush. Day temperatures can be up to 20% higher than night temperatures for example.

Cooling

Managing temperature may seem straight-forward but the heat generated by LED lights, HPS lights or the sun will vary across rooms, time exposure and with the distance of the light source from the plants. Measurement sensors should be distributed across rooms to monitor and trigger temperature resources.

Humidification/Dehumidification

This is a topic that can be underappreciated by cultivators. It is important to slowly transition humidity as you move plants from cuttings to clones, to veg and to flower. Beginning in a very humid stage to motivate root start, humidity will be stepped down from an opening near 90% down to an arid 50% in your end of flush flower rooms. We detail the transitions in 5% increments in the white paper.

The 4-Layer aeroponic flower room with movable racking systems from the side with a tall human for scale. One can do a lot with 30′ ceilings.

Relative Humidity (RH) and the related VPD are the key metrics to accelerating growth throughout the stages. Not sizing dehumidifiers correctly is one of the most common mistakes our grow partners learn about as they move to full production. In the first phase of turning cuttings from healthy mothers into rooted clones, hitting your target VPD to motivate root growth is the number one success factor. This will require the addition of humidity into your clone room. It is also typical to require raise the humidity of your flower rooms when you transition clone/veg plants from the high humidity clone/veg room into an initially dry flower room, otherwise the plants may go into shock as a result of the dramatic change.

As flowering begins, if humidity remains high, and the VPD is below target, the plants will not be moving nutrients and transpiring moisture. We have seen lowering the humidity from 70% in a flower room down to 50%, results in a yield increase from 50 grams to 90 grams of dry trim bud per plant, so a smooth transition can both accelerate growth and have a big impact on your margins and profitability.

Plants in aeroponics can truly have explosive growth. This means that they will also transpire moisture at an accelerated rate. Fast automated growth in aeroponics means increased humidity output. Sizing these critical systems for humidification/dehumidification are a critical part of the design process.

Airflow

Fans combined with your cooling/heating/humidity/dehu systems need to mix the air in a room to break the boundary layer at the leaf surface for transpiration. As we covered, VPD is critical to growth success. A dry surface motivates the plants to transpire moisture. We recommend flow rates across the canopy in a 0.5-1.5 meter/second rate to align to your genetics and where you are in the flowering process.

A raw facility before it gets outfitted.

Airflow and flowering means rich beautiful aromas are generated. Every facility has to consider odor control. If you are in a populated area, you will have ordinances and neighbors to satisfy. The best way to do this is to minimize the amount of air that exits a facility. This is also the cheapest approach.

Sterile HEPA filters and scrubbing systems clean air of pathogens and odor but they also need to circulate and “condition” air to the correct temperature and humidity levels before it can be recirculated into a room. Oftentimes, this is a good place to also recapture humidity and reinject it into your pure water cleaning systems.

Key vendors to talk to about sizing air treatment systems are SURNA, Quest, Desert Aire and AGS. Each of these vendors have specialties and tend to be superior partners in different regions of the world. We would be happy to introduce you to excellent support resources for air management systems.

To download the complete guide and get to the beef quickly, please request the complete white paper Top Quality Cultivation Facilities here.

Click here to see Part 2 where we discuss water quality and management.

Advancing Knowledge and Expertise in the Cannabis Testing Industry

By Greg Kozadjian, MBA ,BSc.
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The cannabis laboratory testing market has undergone a lot of changes in the past ten years. With those growing pains so common in such a new industry, come plenty of challenges driven by market dynamics, new regulations and scientific advancements.

Julie Kowalski, a cannabis testing consultant at JA Kowalski Science Support, has seen these changes firsthand. For twelve years, she worked at Restek as a senior chemist, helping to provide expertise and develop analytical solutions for their cannabis testing partners. She also worked as chief scientific officer for Trace Analytics, a cannabis testing lab in Spokane, Washington. Between being an advisor, consultant, trainer and accreditation assessor, she wears many different hats in the space. We sat down with Kowalski to learn more about the evolution of the marketplace, the importance of product safety and some of the common challenges that labs face.

Greg Kozadjian: Tell us a little about yourself and how you came to be working as a consultant in the cannabis and hemp testing industry?

Julie Kowalski, Owner of JA Kowalski Science Support

Julie Kowalski: I began working on gas chromatographs when I was about 20 years old, added liquid chromatography to my repertoire in my early 20’s, and have been in the lab nearly every day since then.

My consulting business launched in early 2020 after I received numerous requests from my network for help and advice regarding cannabis testing. I am passionate about helping people, talking science, and promoting growth and innovation in the cannabis industry.

Speaking with individuals and businesses who potentially received conflicting advice or felt somewhat overwhelmed by the complex and rapidly evolving cannabis industry, I realized I could help. So, I decided to utilize my experience and knowledge to promote trust and expertise within the cannabis industry and champion science over profit.


Kozadjian: Why do you think it’s crucial to test cannabis and hemp-based products in today’s market?

Kowalski: The way I look at it is that cannabis and hemp-based products are like any other product in that the consumer has the right to have some assurance that these products are safe, and that the labeling information is accurate.

Then, there are the increasing number of people seeking to use cannabis for medicinal reasons. Again, the industry should be able to assure them that the products they are using are safe to help them with their health issue.

Kozadjian: How has the market evolved over the last five years to meet the current testing regulations, and which of those regulations focus more on the safety of cannabis and hemp-based products?

Kowalski: In the past five years, more states have been coming online domestically. So, we are dealing with a regulatory environment where different states may have different regulations, a situation that will continue to exist for the foreseeable future. There have been efforts on the regulatory side, if not to coordinate efforts directly, to at least connect and communicate, and hopefully, out of those communications comes increased coordination.

I am hopeful that scientists, myself included, can do our part and provide additional data and information about testing that works, testing that doesn’t work, and that the regulators will consider and incorporate much of that information into changes in current and future regulations.

It is important to note that many state agencies were put in the position of creating a regulatory system that they were perhaps not familiar with, or accustomed to doing, particularly from the testing standpoint. There are no federal programs to model against, so programs are being developed from scratch and need to address all aspects of the market. It is a complicated task. It made sense to borrow from similar existing markets, but there is now the opportunity to use what we have learned to improve regulations.

For example, adopting certain criteria and practices from environmental, food, and agricultural testing was a great place to start. Now, we better understand some of the unique challenges associated with cannabis testing, it is time to set our fit-for-purpose best practices.

I hope that we, as an industry, can increasingly provide more data to help guide the regulators so that their goals are achieved and based on a growing body of data. I am optimistic that there will be much more interaction and coordination between regulators and scientists. This would greatly help with some of the struggles some cannabis labs are feeling in the current market.

Kozadjian: What are some of the challenges that testing labs face?

Kowalski: The cannabis and hemp-based products market is competitive with multiple sources of pressure. A definite challenge has been the gold rush mentality. Folks want to enter the cannabis business, and establishing a testing lab is attractive and perhaps perceived as more comfortable because it is not directly growing or producing a product.

There is a burden to set up a lab and open as quickly as possible because while the lab is being set up no money is being made. It can be stressful, and sometimes shortcuts are taken while developing technical programs. These shortcuts can ultimately cause disruption, stress, and risk. I saw this ten years ago, I saw this five years ago, and I am still seeing it now. I am still waiting for people to come into the industry with more realistic expectations of what it takes to establish functional technical programs and laboratories.“There are fundamental knowledge gaps that this market as a whole needs to address.”

Inadequate technical programs resulting from poorly vetted and insufficiently validated methods do not function well in the real world, changing regulations, as well as changing matrices, can result in chaos in the lab. A lab will fight fires daily if it does not plan for and build well-vetted, robust methods. Unfortunately, I have seen many new testing labs rush through development, and then when they open their doors for business, they realize their methods do not function properly.

Daily, they may be faced with deciding whether they should pass a sample batch because technically, it did not meet the criteria, but the client is waiting. Or labs constantly needing to retest may lose confidence in their ability. This is a high-stress situation, and quite a few labs are probably operating in this mode in the market right now. Substandard testing is becoming riskier as we see scrutiny, mainly due to test lab shopping increasing. I do want to make it clear and be fair to point out that the economics of cannabis testing is challenging. Pricing in most markets is too low to allow high-quality testing.

Kozadjian: How do you think this testing era will evolve in the next five years?

Kowalski: I think we will start to see more involvement and recognition of standards organizations like the AOAC, USP, ASTM. They have existed and have been working for at least a few years, and now are publishing methods, guidance documents, and providing education. That will be very helpful, and I invite testing labs to join in and participate in these efforts. Your voice is critical. We need more knowledge in the market, whether it is knowledgeable people entering the market, or people currently in the market who are willing to invest the time to learn analytical chemistry, for example. There are fundamental knowledge gaps that this market as a whole needs to address.

Brooke Butler, Simplifya
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Five Reasons Everyone in Cannabis Should be Using RegTech

By Brooke Butler
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Brooke Butler, Simplifya

As the cannabis industry continues to grow, regulations will only get more onerous and complex, and enforcement will ramp up. In order to survive, it’s imperative for cannabis business owners and the ancillary companies that support them – such as banks, insurance agencies, law firms and marketers – to keep on top of regulations.

Due to cannabis’ fractured regulatory environment, confounding state and local laws, and the fact that regulations are constantly changing, keeping track of it all can nearly seem impossible at times. But companies don’t need to reinvent the wheel and handle compliance on their own.

There are a host of tools on the market today that can help cannabis related businesses (CRBs) streamline their operations. RegTech solutions can drastically reduce the challenges of navigating compliance, saving companies significant time and money so they can focus on their core competencies. Here, let’s take a look at five of the main reasons everyone in the cannabis ecosystem should seriously consider adopting RegTech solutions today.

1. Simplify the Complex

The heart of RegTech solutions is taking out the guesswork when tackling compliance while mitigating risk. Besides there being a vast number of regulations that vary by state, they’re also not easy to understand – they’re really written for lawyers, can be hundreds of pages long, and don’t offer implementation guidance. Thankfully through RegTech, operators and ancillary companies are alerted when regulations change and are given easy-to-follow implementation and remediation guidelines that can be as easy as checking a box.

Beyond just simplifying compliance, RegTech can substantially increase operational efficiency.

As the cannabis industry has been rapidly growing and maturing, we’ve been seeing a major uptick in M&A activity – M&A activity tripled in the sector from 2020 to 2021 – and with each new state a company enters, comes a host of new regulatory challenges. When expanding to a new state, RegTech solutions provide updates in real time, making sure, for example when you expand to Ohio, it’s not at the expense of complying with regulations in your core market of Illinois. Also, from an operations strategy perspective, RegTech solutions can be incredibly useful in helping companies decide what markets to pursue, as they can offer regulatory snapshots that compare tax laws, average margins, consumer segments, product stipulations, marketing restrictions and more. Thus besides simplifying compliance, RegTech can substantially increase operational efficiency.

Since cannabis is such a highly regulated industry, there are a ton of documents an operator has to keep on hand and be able to produce in a moment’s notice. Through RegTech, operators can store and organize all documents that are applicable to them electronically. So, when an inspector comes into a dispensary for a surprise inspection, rather than sweating bullets and digging through six filing cabinets trying to locate say a visitor log from three years ago, using RegTech a manager can quickly search records electronically, download and print the needed document, pass the inspection and go back to work.

2. Save Costs by Streamlining Compliance

While adopting RegTech solutions has a cost, the cost savings companies yield from RegTech way exceed the investment. RegTech providers have teams of dedicated analysts constantly tracking regulations and providing updates, making it so companies don’t need to hire much more costly lawyers to track regulations and amend policies and procedures. Rather, they can tap into RegTech solutions and leverage decades of experience and lean on the best regulatory experts in the field, while saving a lot of money.

RegTech providers have teams of dedicated analysts constantly tracking regulations and providing updates,

Just to give a small example of the cost savings RegTech can provide, on average a CRB spends over $20,000 to produce a new SOP package when using an attorney and nearly $8,000 when updating an SOP package using an attorney. Compare that to Simplifya’s fully customizable SOP package, where a CRB spends on average less than $1,600 to produce a new SOP package and less than $650 to update an SOP package – a 92% savings.

When considering costs, it’s important to think holistically and anticipate potential problems that could come up. One of the biggest pain points for companies starting up operations or entering new markets is complying with confusing tax codes – no industry is taxed to the degree cannabis is, and it’s easy to lose sight of tax obligations when planning operations. Unanticipated withholding requirements can create serious cash flow problems. RegTech solutions clearly outline requirements, as well as track updates, which help companies plan operations and expansion plans and prevent nasty tax surprises from creeping up, and they’re a much cheaper alternative to hiring tax lawyers.

While there are tremendous growth opportunities in cannabis, the industry is also facing significant headwinds, including the high cost of capital, supply and demand misalignments, and shrinking margins, and as we head towards recession, cost efficiency will become more and more important. Not only can RegTech help companies survive by helping ensure they stay compliant and don’t get fined or even shut down for breaching regulations, they also help companies run more efficiently and save major costs on operations.

3. Hold Your Employees Accountable

In addition to using RegTech to stay on top of compliance, it can be a powerful HR tool as well. Companies can utilize RegTech platforms to make and track assignments and tasks for employees. If you’ve already spent the time and money to create SOPs, RegTech tools are essential to making sure they’re actually being followed correctly. 

As many cannabis companies are expanding rapidly and bringing new employees into their fold – particularly those that are engaging in M&A – it can be difficult to get employees up to speed and following SOPs. RegTech automation and tracking solutions help flatten the learning curve and ensure employees are completing tasks on time, boosting efficiency and preventing problems that may arise – and if problems do arise, the tools help pinpoint where and when for efficient remediation. And if you’re an MSO or a SSO with multiple locations, RegTech allows employers to keep track of their dispersed employees without having to be in 10 places at once. This holds employees accountable for their actions for smooth operations while reducing growing pains.

4. Identify Issues Before They Become an Issue

The most compelling reason for having strict regulations in the cannabis industry in the first place is to protect consumer and patient health. Given the long, brutal history of cannabis prohibition, where lies and misconceptions about cannabis consumption being “dangerous” were perpetuated in the mainstream, the last thing the industry needs is people consuming products that are in any way contaminated. If you skirt the rules and manage to put out compromised products without a regulator catching and dinging you first, consumers may get sick. This can lead to a recall and tarnish a brand’s reputation. Competition is steep in this industry and even one incident can be irrecoverable. If consumers have reason to believe you’re not putting out consistent, safe products, they’ll buy from your competitor instead.

RegTech helps companies track all processes and procedures so that they can spot problems before they occur and ensure nothing dangerous makes its way to the public, which in turn shields brand reputation. Also, it’s important to note – in the cannabis ecosystem, every company you work with has to be licensed. If you work with an entity that’s not, you are very liable. Tracking licensing information is burdensome, especially for retailers and ancillary businesses like lenders and insurers who work with many vendors. Luckly, RegTech providers have already done the heavy lifting, pulling APIs into state databases and creating tracking systems of licenses that make it easy for companies to ensure every entity they work with is operating with a valid license. This saves companies from having to hire people to track licensing information on a weekly or even daily basis, which can be very costly, and more importantly, keeps them compliant and prevents slip ups that could jeopardize consumer and patient health. 

5. Looking Towards the Future, Regulations will Only Become more Complex – Only the Compliant Will Survive

A common misconception people have about the cannabis industry is thinking that federal policies like SAFE banking will be a catch-all to their banking woes, opening up the floodgate to institutional investment. The fact of the matter is, however, SAFE banking would be ineffective without RegTech. Cannabis companies need to demonstrate reliability and a history of compliance in order to attract investors and accumulate capital, and they do this through using RegTech platforms. Conversely, financial institutions also use RegTech to verify licenses, ensure legitimacy and assess lending risks based on the locations in which their borrowers operate. After SAFE banking is finally enacted, since larger institutional investors have so much on the line, they’re going to be particularly careful and only invest in those companies that can comprehensively demonstrate a history of compliance. This will also be the case for major CPG companies looking to acquire cannabis companies – they’ll want companies that have used RegTech to show compliance and optimize operations, since those companies will be more trustworthy and transitioning them under new management will be easier. In every major industry other than cannabis, RegTech solutions have been adapted. This is where cannabis is headed, and the companies that adopt solutions and demonstrate compliance will come out ahead.

Cannabis companies need to demonstrate reliability and a history of compliance in order to attract investors and accumulate capital

The other major misconception some people have about the cannabis industry is that once cannabis is legalized on a federal level, state and local regulations will somehow just go away, so current RegTech solutions may become ‘obsolete.’ This couldn’t be further from the truth. In no world is there going to a federal legalization system that says states can no longer create their own rules around cannabis. Think about the alcohol or gambling industries. Alcohol and gambling are federally legal, but every state – and even some counties and cities within those states – can have very different rules. Federal legalization will just mean additional regulations will be piled on and thus RegTech will only become more important.

While many companies in the cannabis space have already adopted RegTech solutions, there are still many others that have taken a reactive rather than proactive approach towards compliance. When major legislation like SAFE banking or federal legalization is approved, there will be a paradigm shift and RegTech will be deemed more essential quickly. Those who have implemented RegTech will have distinct advantages. To survive and thrive in the industry going forward, it’s prudent to proactively handle compliance and adopt RegTech solutions today.

Uber Eats, Circle K Dip Their Toes in Cannabis

By Cannabis Industry Journal Staff
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Last week, Uber Eats and Leafly announced a partnership to begin cannabis deliveries in Toronto. Adults in Toronto can now place orders from licensed cannabis dispensaries through the Uber Eats app, delivered to them by the cannabis retailer. This marks the first time cannabis deliveries are possible on major delivery platforms.

General Manager of Uber Eats Canada Lola Kassim says their investments in delivery growth in Canada are paying off with deals like this. “We are partnering with industry leaders like Leafly to help retailers offer safe, convenient options for people in Toronto to purchase legal cannabis for delivery to their homes, which will help combat the illegal market and help reduce impaired driving,” says Kassim. “Over the last few years, we have invested heavily in our delivery business and selection has expanded tremendously. Uber Eats has grown quickly to become a versatile platform usable by diverse businesses large and small.”

Currently, Uber Eats Canada is working with three dispensaries: Hidden Leaf Cannabis, Minerva Cannabis and Shivaa’s Rose. Marissa and Dale Taylor, owners of Hidden Leaf, say this deal allows their small business to expand their reach and grow their business across the city.

Meanwhile, much further south in Florida, Circle K and Green Thumb industries have reached a deal offer up their gas station convenience stores in Florida as retail space for cannabis dispensaries.

Circle K is a massive global convenience store chain with 600 locations in Florida. The partnership they signed will allow Green Thumb to set up shop in ten of those locations beginning next year.

However, Florida regulators have stepped in and told reporters that they have not approved the deal. “This project has not been approved by the State,” a Florida Health Department spokesperson told the Washington Examiner. “Florida has never approved a Medical Marijuana Treatment Center to operate out of a gas station.”

Scenes From The 2022 Cannabis Quality Conference & Expo

By Cannabis Industry Journal Staff
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PARSIPPANY, NJ, October 17-19, 2022 – The Cannabis Quality Conference & Expo (CQC) took place in New Jersey last week. The agenda featured three tracks of educational talks, panel discussions, keynotes and breakout sessions.

Highlights from the 2022 CQC

At this year’s event, the conference featured three different keynote presentations, each on different days as well as Lunch & Learn sessions, led by Matthew Anderson, CEO of Vanguard Scientific. He sat down with two experts in cannabis law for interviews during the lunch hour on Tuesday, October 18.

Investigations & Enforcement: A Former Federal Prosecutor’s Perspective

  • Matthew Anderson spoke with Barak Cohen, Chair of the Cannabis Industry Group at Perkins Coie, to discuss federal investigations, Justice Department prosecutions and white-collar offenses.

Compliance is Key: Best Practices for Your New Jersey Cannabis Business

  • Anderson interviewed Casey Leaver, Director of Regulatory Compliance at Vicente Sederberg, to discuss compliance culture, quality controls, New Jersey regulations and more.
Commissioner Maria Del-Cid Kosso takes the stage on Monday

The conference began on October 17 with a keynote presentation led by Commissioner Maria Del Cid-Kosso of the New Jersey Cannabis Regulatory Commission. Commissioner Del Cid-Kosso highlighted the progress the state has made so far with respect to cannabis legalization as well as their goals for the future of the state’s new market.

On the second day of the CQC, Toi Hutchinson, President & CEO of The Marijuana Policy Project, kicked things off with an inspiring keynote discussion where she discussed racial disparities in the industry, social equity, progress and reform efforts.

What People Are Saying About The 2022 CQC

Below are some testimonials we found from this year’s event:

Toi Hutchinson delivers her keynote presentation on Tuesday

“What set the Cannabis Quality Conference apart from many others was the intentionality and focus on high value substance from the presentations.”

“Once again, excellent panels today at the CQC here in Jersey! Have I mentioned how much I love to learn? This industry is forever evolving and being able to observe and watch it roll out from infancy in New Jersey has been tremendous.”

“What an informative and motivating event!”

“I feel fortunate to have been in attendance for such inspiring, informative and REAL discussions being had by industry experts from all across the country.”

“It was so great to listen, meet and speak with so many industry influencers!”

Coming Soon For 2023

After a successful event in New Jersey, the conference begins its planning for next year. The Cannabis Quality Conference & Expo will be returning to New Jersey in 2023. Stay tuned for important announcements, like the dates and location, coming soon.

Scenes From The 2022 CQC

Below are some snapshots of what this year’s CQC had to offer.

About Cannabis Industry Journal

Cannabis Industry Journal is a digital media community for cannabis industry professionals. We inform, educate and connect cannabis growers, extractors, processors, infused products manufacturers, dispensaries, laboratories, suppliers, vendors and regulators with original, in-depth features and reports, curated industry news and user-contributed content, and live and virtual events that offer knowledge, perspectives, strategies and resources to facilitate an informed, legalized and safe cannabis marketplace.

About the Cannabis Quality Conference & Expo

The Cannabis Quality Conference & Expo is an educational and networking event for the cannabis industry that has cannabis safety, quality and regulatory compliance as the foundation of the educational content of the program. With a unique focus on science, technology, safety and compliance, the “CQC” enables attendees to engage in conversations that are critical for advancing careers and organizations alike. Delegates visit with exhibitors to learn about cutting-edge solutions, explore three high-level educational tracks for learning valuable industry trends, and network with industry executives to find solutions to improve quality, efficiency and cost effectiveness in the evolving cannabis industry.

ASTM Debuts New Standards for Cannabis

By Cannabis Industry Journal Staff
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Earlier this month, ASTM International announced that the D37 cannabis committee has approved four new standards for the cannabis industry. Just a few days ago, the same organization announced the development of a new standard that will be published soon.

According to a press release, the four new standards that are already approved will help those working in the cannabis space, as well as regulators and consumers. The four new approved standards are as follows:

  • D8375: This standard provides a method to establish cannabinoid content in cannabis and hemp samples. ASTM member Garnet McRae says, “the standard will help ensure products are labeled properly in jurisdictions where they are legally produced and sold.”
  • D8399: This standard “will aid laboratories in analyzing cannabis and hemp samples to establish pesticide concentration levels – or lack thereof – to ensure products meet regulatory requirements within appropriate jurisdictions,” reads the press release.
  • D8442: This standard aids stakeholders in the cannabis supply chain with quality control measurements. It provides a method for testing terpenes and cannabinoid levels using gas chromatography.
  • D8469: This one provides a new metals testing method for cannabis using inductively coupled plasma mass spectrometry (ICP-MS).

David Vaillencourt will be discussing standards and more at the Cannabis Quality Conference on October 17. The fifth standard that ASTM International announced this week is D8439. This one is designed “to support sound and reproducible research” by providing specifications for medicinal-use cannabis flower. ASTM member David Vaillencourt says it will help establish consistent testing for safety and quality. “With a fragmented cannabis industry marketplace, there is no common set of requirements around reporting cannabinoids and terpenes, which are the primary constituents that are linked to therapeutic benefits,” says Vaillencourt. “This lack of consistency harms public health and prevents evaluation of product safety and efficacy across jurisdictions. This standard provides a solution to this problem.”

Can Employee Resource Groups Really Help Streamline My Business? Yes. Here’s How…

By Anya Varga
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In 1996, the Harvard Business Review published an article called Making Differences Matter: A New Paradigm for Managing Diversity, in which the authors argued that companies should adopt a radically new way of understanding a diverse workforce. Instead of hiring employees of different backgrounds and asking them to blend in, or limiting people to areas of work based on their identity, they suggested embracing and bringing together the varied perspectives and approaches to work that members of different identity groups bring. Since then, a steady stream of companies – from GE to PricewaterhouseCoopers to cannabis companies – have implemented several new practices, initiatives and programs under the category of Diversity, Equity and Inclusion (DE&I).

DE&I has become highly important over the last few years, and many companies are seeing the benefits. Today, 83% of professional investors are more inclined to invest in stock of a company well-known for its social responsibility. On the other hand, a company that is seen as not responsible stands to lose as much as 39% of its potential customer base, with one in four consumers telling their friends and family to avoid it. As these benefits draw more companies to focus on DE&I, it’s important to remember that your plans should ultimately be centered around uplifting employees from all backgrounds.

“Listen, test, learn and then listen again!”While still relatively new to the cannabis sector, one DE&I initiative that is making some headway towards that goal is the Employee Resource Group (ERG). Essentially, it’s a group of employees who join together in their workplace based on shared characteristics or life experiences. ERGs work to create communities which bring people together, with internal and external partnerships to support those groups, and they are gaining popularity. In fact, according to a Bentley University report, almost 90% of Fortune 500 companies utilize them. They’re often used because issues are addressed from within an organization by the people who are most directly impacted by them. They can also serve as a direct pipeline of communication between employees and employers, as well as a place for new ideas and solutions to problems to blossom.

When it comes to recruiting and retention, ERGs have their own specific benefits. According to a survey conducted by Software Advice, 70% of respondents between 18 to 24 years old and 52% of respondents between 25 and 34 reported they would be more likely to apply for a role at a company that had ERGs. With regards to retention, 50% of survey respondents across all ages stated they would remain at a company because it had an ERG.

While some in the cannabis sector have already implemented ERGs, this new practice is one that all cannabis companies should consider – particularly as this industry grapples with its own unique DE&I challenges and history.  To that end, check out the tips below to help get you started.

  1. Gauge interest: Many ERGs start organically. The first question you need to answer before you can start building an ERG is to ask if your employees want one. The statistics indicate they likely will, but it’s important to establish that leadership is willing to listen. Employees should play a major role in this process from the beginning. However, remember that the DE&I strategy is not their responsibility, and ERGs should be a part of a more comprehensive plan.
  2. Find the willing and work with them: You’ve got to find the people that these topics matter to and embrace them. Participation is key, and if the topic at hand is one that someone is not personally connected to, your ERG may not live up to its full potential. ERGs are a significant time investment, so you have to make sure those taking part are ready, willing and capable of balancing their job responsibilities with their additional role in the group. Participation goes both ways, too. You have to make sure that managers are aware that someone is in an ERG. “Be open to making mistakes and learning from them, and then changing for the better.”
  3. Use executive sponsors: An essential piece of successfully incorporating ERGs into your organization is recruiting executive allies from the corporate side to serve as sponsors. This can help break through barriers, get decisions made, and keep all parties organized. Executive sponsors are also great for employee development, as they can see firsthand the talent in the organization and become a mentor. Executive sponsors are often an important request from ERGs, and they are worthwhile to recruit for. Sponsors don’t have to be from the same affinity as the group, and in some ways, that can actually be a good thing. Solidarity is another important factor to company health, and allyship is imperative for solidarity.
  4. Set goals: Define a mission early on. It’s important for ERGs to have a strong mission statement with core goals that the group is formed around achieving. Keep in mind, these need to be tangible goals with specific benchmarks. It can’t just be “increase diversity in hiring.” Set a number you’d like to reach and a date you’d like to reach it by. Having clear objectives keeps a track record for your ERG, and is the foundation for success. These will also ensure that your ERG is not just for marketing purposes. Achieving substantive goals will keep the group going, as confidence gets built on the inside and from the outside.
  5. Be clear: ERGs are all about communication, so clarity has to be a top priority. None of the above tips work without that. You have to make sure the groups are not questioning what is expected of them, what resources they have to work with and what goals they are working towards. It’s always going to be a learning process, and there will certainly be unforeseen challenges, but being on the same page from chapter one will make the process that much more beneficial to all involved.

As stated above, ERGs are still new, just like the industry we want to bring them into. Be open to making mistakes and learning from them, and then changing for the better. That process is what ERGs are about at their core, after all. Listen, test, learn and then listen again!