MJ News for 01/20/2015


Jul 25, 2008
Reaction score

Pro-pot group ResponsibleOhio details marijuana legalization plan: 5 highlights

COLUMBUS, Ohio -- Ohioans over 21 could buy marijuana from a legal, licensed store as early as summer of 2016 if an effort to legalize the drug is successful this year.

The group calling itself ResponsibleOhio announced new details of a proposal to legalize the production, sale and medical and personal use of marijuana in Ohio. The group is aiming to legalize the industry through a constitutional amendment before voters in November 2015.

Northeast Ohio Media Group and others previously reported ResponsibleOhio would limit growing of cannabis to 10 regulated sites to be identified in the amendment and five separate sites would test all cannabis for its safety and potency.

The details released Tuesday describe who would make the rules, how growers, product manufacturers and retailers would become licensed and what limitations would be in place. The group, which is backed by unidentified investors and several Columbus public relations and ballot initiative firms, plans to submit amendment language in the next few weeks.

Here are five highlights from Tuesday morning's release.

New regulators

The proposed amendment would create a seven-member Marijuana Control Commission to create regulations for the industry, audit marijuana establishments and enforce regulations.

The governor would appoint the following commission members: licensed Ohio physician, sworn Ohio law enforcement officer, licensed attorney with experience in administrative law, Ohio-based patient advocate, Ohio resident with experience owning and operating a business, Ohio resident with experience in the industry and a member of the public who is an Ohio resident over age 21.

Members would serve four-year, staggered terms and could not have served as an elected official in public office during the eight years prior to the creation of the commission.

The commission would establish rules and regulations for most aspects of the industry, from licensing facilities to testing products to qualifications for medical marijuana patients.

Tax revenue

Marijuana would be taxed at 15 percent at every level of the supply chain: grow sites, marijuana product manufacturing facilities and retail stores. Sales tax and commercial activity tax would also be levied.

The majority of marijuana tax revenues, 55 percent, would go toward municipal and township governments for police, road repair and other public services while 30 percent would go toward counties for public services. The remaining 15 percent would fund mental health and addiction prevention and treatment programs, marijuana research in Ohio, nonprofit medical marijuana dispensaries and the commission.

Tax-free medical marijuana

Nonprofit dispensaries would sell medical marijuana and marijuana products at wholesale prices, offering lower prices to patients who cannot afford the full cost.

Physicians would determine whether patients meet a "debilitating medical condition," defined by the amendment as cancer, glaucoma, amyotrophic lateral sclerosis, PTSD and other conditions. Patients under age 18 would need parental consent.

Physicians who prescribe marijuana would be held to the same prescription standards as prescribing other medications.

More on those growers

Ohio marijuana legalization campaigns have failed in the past largely because they lack the money to obtain the necessary signatures to put the issue on the ballot. ResponsibleOhio leapt that hurdle by securing wealthy investors who will likely stake a claim on one of the 10 growing locations.

The overview released Tuesday doesn't name those sites.

The commission would have the authority to revoke grower licenses or issue additional licenses as needed to meet demand or replace sites that close or choose not to apply for a license.

Marijuana stores on every corner?

The amendment would limit the number of retail marijuana stores to no more than one store per 10,000 Ohio residents -- or about 1,150 stores based on the last Census.

Similar to restaurants and stores seeking approval to sell alcohol, marijuana retail stores would first ask voters in the precinct to OK the location before applying for a state license to sell. If approved by voters in November, the earliest stores could seek approval on local ballots would be a May 2016 special election.

The stores could only sell marijuana grown at the 10 licensed sites and marijuana-infused products and accessories from licensed product manufacturing facilities.

Retail stores, dispensaries, manufacturers, testing sites and growers could not be located within 1,000 feet of churches, libraries, playgrounds, elementary or secondary schools and state-licensed child care centers. The amendment specifies marijuana use is still illegal in public places, schools and prisons and on planes, trains and motorboats.


Jul 25, 2008
Reaction score

Michigan sees another dip in medical marijuana patients

The number of patients in Michigan's medical marijuana program declined for the second year in a row in 2014, according to state statistics reviewed by The Detroit News.

Last year, the number of identification cards for patients in the program totaled 96,408, according to the Michigan Department of Licensing and Regulatory Affairs. That compares with 119,470 patients in 2011, and 118,368 in 2013.

The downward trend continued in Metro Detroit, too, with the number of medical marijuana patients falling in Wayne, Oakland and Macomb counties for a third straight year.

In Wayne County, the number dropped from 14,169 in 2013 to 12,258 last year. Since 2011, participation has dropped 20 percent, from 15,385.

Oakland County's patient ranks declined from 10,741 in 2013 to 9,330 in 2014. Since 2011, participation has dropped 22 percent, from 12,083.

Macomb County's number of patients in the state medical marijuana program dipped from 7,997 in 2013 to 7,644 last year. Since 2011, participation has fallen 10 percent, from 8,499.

Michigan's Medical Marihuana Act, which allows residents with debilitating medical conditions to legally use the drug, was approved by the state's voters in 2008.

Under the law, Michiganians can apply for and obtain licenses to use and grow marijuana for medicinal purposes.

Officials with the Department of Licensing and Regulatory Affairs said the agency does not speculate on why the number of patients is down.

Morgan Fox, a spokesman for the Marijuana Policy Project, said it's not clear what's behind the decline.

"The number of patients in Michigan has been fluctuating and it's tough to say if there's a direct cause," he said.

Based in Washington, D.C., the organization advocates and lobbies for the legalization of marijuana use.

Fox said many reasons may be driving the trend. A big one is probably that patients don't feel the state law protects them from prosecution, he said.

Michigan allows licensed people to use, grow and sell marijuana for medicinal purposes, but the drug is still illegal under federal law, and patients with state-issued cards have been prosecuted.

In one instance, an Okemos businessman who followed state law when leasing warehouse space to licensed medical marijuana growers was arrested by federal authorities, tried and convicted for his role in the operation. He's serving a three-year federal prison sentence.

And in Lansing in 2013, police and Children's Protective Services removed a couple's 6-month-old daughter from their home for six weeks because the parents used marijuana to treat medical conditions. Both had state-issued medical marijuana patient cards.

"A lot of these patients may have just given up on Michigan's system and moved somewhere with a more robust law," Fox said. "And the issue of safe access in Michigan is still very much in the air, in terms of whether dispensaries are allowed and how they're supposed to operate."

Michael Komorn, president of the Michigan Medical Marijuana Association, also said the decline is likely due to the inconsistent way police and courts handle medical marijuana cases, which has made people afraid to get the cards.

The association is an advocacy group for patients and caregivers and educates government officials and the public about medical marijuana.

"People see expectations of the (state medical marijuana card) protecting them from being arrest are not being met," said Komorn, who is also a Southfield-based attorney. "There's been no incentive for people to register."

Jamie Lowell, chairman of the Michigan Chapter of Americans For Safe Access, agreed.

"There's very aggressive law enforcement against medical marijuana activity in some areas," he said. "In some places, it appears very difficult to use the protection and defenses the (Medical Marihauna Act) was intended to create and the cards don't mean a whole lot to some people.

"They figure, why go through all the steps to get a card when it doesn't appear to provide the type of protections it was intended to."

Based in Washington, D.C., Americans For Safe Access works to ensure safe and legal access to (marijuana) for therapeutic uses and research.

Lowell said another likely factor is lawmakers' 2012 decision to extend the period for which medical marijuana cards are valid.

"The licenses are now good for two years instead of one," Lowell said. "So the people reregistering the following year won't show up (in the state's reports)."

Since the state's voters legalized medical marijuana, some communities have passed ordinances decriminalizing possession or the use of the drug so that violations are treated like parking tickets.

Ferndale, Jackson and Lansing went a step further in 2013 and made it legal to possess, use or transfer up to an ounce of marijuana on private property.

In addition to Ferndale, Oakland County has five communities with eased marijuana restrictions.

Voters in three of the county's communities — Berkley, Huntington Woods and Pleasant Ridge — loosened marijuana use laws in November.

Berkley and Huntington Woods both passed ordinances to decriminalize the drug's use. Pleasant Ridge residents approved amending the city's charter to make some marijuana-related crimes a low priority for police.

Hazel Park and Oak Park previously decriminalized the drug.

Statewide, 13 communities have liberalized laws against marijuana, possibly signaling a growing acceptance of its use.


Jul 25, 2008
Reaction score

Oregon's largest medical marijuana grow site serves only California patients

Oregon’s biggest medical marijuana grow site doesn’t even serve Oregonians.

The grow site, located in the Josephine County community of Selma, produces medical marijuana for 104 Oregon medical marijuana patients – all of them in California.

Two patients live in northern California and the rest live in and around Orange County, Calif., according to The Oregonian/OregonLive’s analysis of 2014 state medical marijuana grow site data.

The Selma grow site, located in the heart of the state’s outdoor marijuana growing region, serves far more medical marijuana patients than any other site in the state.

The next largest, according to The Oregonian/Oregonlive’s analysis, serves 62 patients and is located in Southeast Portland.

Oregon has seen explosive growth in large-scale marijuana production in just the past two years, according The Oregonian/OregonLive’s analysis. Among the findings: 283 grow sites statewide produce cannabis for 11 or more medical marijuana patients – a 130 percent spike since 2012.

The analysis also revealed 23 grow sites produce for 20 or more patients, a 156 percent increase since 2012. The Oregonian/OregonLive’s analysis is based on 2014 grow site data maintained by the Oregon Health Authority.

(Oregon marijuana growers vie for real estate as they prepare for recreational market)

The agency released the data in response to a request by The Oregonian/OregonLive. It includes ZIP codes for every Oregon medical marijuana grow site producing for 11 or more patients, as well as ZIP codes for patients associated with those locations. The information was stripped of patient identities and grow site addresses -- information that is, by law, confidential.

Portland tops the list of cities with the largest number of grow sites serving 11 or more patients. Next up: Williams, Grants pass, Cave Junction and Eagle Point, southern Oregon communities where marijuana culture and outdoor production thrive.

For every patient, growers can have up to six mature marijuana plant and 18 smaller plants. The amount of marijuana plants produce varies and depends on the conditions and growers’ skill. An experienced commercial grower can produce a half-pound to a pound and a half per plant; a marijuana plant grown outdoors can produce between 3 to 5 pounds.

Medical marijuana production is not regulated in Oregon. Authorities don’t track how much medical marijuana is produced or where it ends up. Cannabis produced by medical marijuana growers ends up going to patients, the state’s newly regulated medical marijuana dispensary market and onto the black market, where Oregon marijuana sells for top dollar, especially out of state.

Oregon allows medical marijuana patients to grow their own cannabis or designate someone to do it for them. The state allows out of state residents to obtain patient cards. Large-scale medical marijuana producers often collect patient cards – a strategy referred to as “card stacking” – so they can boost the amount of cannabis they’re allowed to produce under law.

Growers said they turn to friends and acquaintances as sources of patient cards. Commercial growers typically pick up some or all of the costs related to a patient obtaining a medical marijuana card.

At Shane McKee’s Clackamas County marijuana grow site, patient cards are posted outside of each grow room. The longtime grower and Portland dispensary owner said he doesn’t worry about oversight from the medical marijuana program; he’s more concerned about proving his grow site is legal in case police show up.

“The last thing I want is a bad mark,” said McKee. “I want to be compliant 110 percent.”

Joel Jennings and Case Van Dorne, medical marijuana growers who own a Southeast Portland dispensary, Five Zero Trees, said they too worry about staying within the cultivation and possession limits of the medical marijuana law.

They always keep their patient cards handy in case they’re questioned by police.

“I don’t let those things out of my sight,” Jennings said.

Oregon lawmakers this session are likely to consider legislation governing medical marijuana production, including one bill that would require the Oregon Liquor Control Commission to regulate commercial medical marijuana production and processing.

Tom Burns, the state’s point man on marijuana policy, said he’s concerned about stepped up marijuana production. Until last month, Burns oversaw the state’s medical marijuana dispensary program. He’s now director of marijuana programs for the Oregon Liquor Control Commission, the agency charged with overseeing the regulation of recreational marijuana.

In an interview late last year with The Oregonian/OregonLive, Burns decried “card stacking” as “a sham.”

His biggest worry, he said, is production will outpace demand and that Oregon marijuana will continue to leak into the black market.

“That’s a problem,” said Burns. “The message I want out is that you it at your own risk. You better do it in the system. If we find out you are selling it on the black market, it may jeopardize your ability to get a (recreational) license.”


Jul 25, 2008
Reaction score

Does Legalization Make Marijuana-Detecting Dogs Obsolete?

Testifying before a House subcommittee last year, the head of the Drug Enforcement Administration warned that marijuana legalization is bad for dogs. DEA Administrator Michele Leonhart was talking about pets that inadvertently eat cannabis-infused snacks. But she could have been referring to marijuana-detecting police dogs, which face an uncertain future in jurisdictions where a whiff of pot is no longer evidence of a crime.

As legalization takes effect in two more states this year, police and prosecutors in Oregon and Alaska are confronting the same canine conundrum that their counterparts in Colorado and Washington have been dealing with since 2012: What good is a dog trained to find marijuana when marijuana is legal?

Drug dogs typically are trained to detect marijuana and several other substances. When they smell one of those drugs, they are supposed to alert their handlers with a signal such as barking, scratching, or sitting down. But the dogs cannot indicate which drug they have smelled, let alone distinguish different quantities—a crucial issue in Colorado, Washington, Oregon, and Alaska, where adults 21 or older are allowed (or soon will be allowed) to possess up to an ounce of marijuana in public.

Until recently, those canine limitations did not matter, because any quantity of marijuana was unambiguously illegal throughout the country. But the ongoing collapse of marijuana prohibition is undermining the legal assumptions that have made drug-detecting dogs such a handy law enforcement tool, one that can be deployed at will to justify searches that would otherwise be unconstitutional.

According to the Supreme Court, letting a police dog sniff a suitcase or a car is not a search, so it does not require probable cause. At the same time, an alert by that dog provides probable cause for a search. Those conclusions, which have always been questionable because they are based on a grossly exaggerated sense of the average police dog's accuracy, look even shakier in light of marijuana legalization.

In the 1983 case U.S. v. Place, the Court concluded that a dog sniff does not qualify as a search under the Fourth Amendment because it "discloses only the presence or absence of narcotics" and "does not expose noncontraband items that otherwise would remain hidden from public view." But that is not true in states where an ounce or less of marijuana does not qualify as contraband. "If a drug dog can reveal non-criminal information about a person," writes University of South Carolina law professor Seth Stoughton in a 2014 Justia essay, "it may fundamentally change the Fourth Amendment character of police canine sniffs."

Even if cops in states where marijuana is legal can continue using the same old dogs without any evidence of wrongdoing, those dogs will be much less useful. A dog's alert to a car (assuming it is accurate) will now indicate anything from a perfectly legal half an ounce of weed in the glove compartment to a felonious kilo of heroin in the trunk. The former scenario will be much more common than the latter, since motorists will be much more likely to have marijuana than the other drugs that police dogs are trained to detect, especially now that people are allowed to possess it in public. If a search triggered by a dog's alert typically finds legal quantities of marijuana (when it finds anything at all), it is hard to see how that alert indicates "a fair probability" that evidence of a crime will be found, which is how probable cause is defined. "If a drug dog could be hitting on a legal substance," Stoughton writes, "courts could very well find that the alert itself does not establish probable cause."

Pam Loginsky, a lawyer with the Washington Association of Prosecuting Attorneys, anticipated this problem in a memo she wrote a month after voters approved I-502, that state's legalization initiative. "Officers will no longer be able to rely solely upon an alert by any of the narcotic canines currently on patrol," she advised prosecutors in December 2012. "If the suspect is under the age of 21 or the canine was not trained to detect marijuana, a positive alert by a trained and certified dog will be sufficient to establish probable cause for a search warrant. In all other cases, the officer will need to develop additional evidence to support a belief that: (1) the substance being detected is heroin, methamphetamine, cocaine or crack cocaine; (2) that marijuana is present in an amount greater than one ounce; and/or (3) that the suspect is manufacturing or distributing marijuana."

Under the Washington Supreme Court's interpretation of the state constitution's privacy clause, police generally need a warrant to search a car. By contrast, the U.S. Supreme Court has long held that the Fourth Amendment allows police to search cars without a warrant as long as they have probable cause, which is the rule that prevails in most states. But either way, police in states where marijuana is legal will face the problem identified by Loginsky: In situations involving adults, an alert by a conventionally trained dog is no longer specific enough to justify a search.

Cops who ignore this new reality do so at their peril, risking lawsuits and evidence suppression. If a vehicle search turns up half an ounce of pot and a kilo of heroin, there will be no way to tell which triggered the dog's alert, and the defense will argue that the heroin cannot be admitted as evidence because it was found illegally. The defense would have an even stronger argument if the search discovered stolen property or a murder weapon along with a small amount of marijuana.

In light of these difficulties, the Washington State Patrol and the Seattle Police Department decided to phase out the use of marijuana-trained dogs, gradually replacing them with animals that alert only to heroin, methamphetamine, crack, and cocaine powder. Police in some Oregon jurisdictions, including Clackamas County and Medford, also are moving away from marijuana-trained dogs.

Meanwhile, Seattle police are trying to retrain their older dogs so they no longer alert to marijuana, a tricky approach that may invite legal challenges to searches triggered by retrained animals. As the lieutenant who oversees K-9 units in Colorado Springs put it in a 2013 interview with Bloomberg News, "Once you put an odor on a dog, it's very difficult to get that odor off a dog." Lawrence Myers, a veterinarian and neurophysiologist at Auburn University who is an expert on dogs’ olfactory capabilities, says "retraining is possible, but it takes time and scientifically valid testing to show that the dogs no longer alert to marijuana." He adds, "I doubt that many departments would do the testing."

The Tacoma Police Department is sticking with conventionally trained dogs, and so are police in several Colorado cities, including Denver, Aurora, Lakewood, Pueblo, and Colorado Springs. New dogs are expensive (about $15,000 each if fully trained, according to the Colorado Springs Gazette), and these departments say the old ones are still useful in certain situations, such as school searches, or in conjunction with other sources of evidence.

Some cops say they are waiting for guidance from state courts. "There are so many unanswered questions," the officer in charge of K-9 training at the Colorado Springs Police Department told Bloomberg News. "There have not been any test cases to say yes or no, we do not have the right to do this."

Other departments are being more proactive. The Gazette reports that Loveland, a city about 50 miles north of Denver, is phasing out its marijuana-detecting dogs based on advice from the Larimer County District Attorney's Office. "It basically goes back to the Fourth Amendment prohibition on illegal searches," a police spokesman told the paper. "We want to make sure we aren't infringing on people's rights."


Jul 25, 2008
Reaction score

(Australia) Dad faces jail for giving dying daughter cannabis oil

His name is Adam Koessler and he's facing criminal charges in Australia for treating his two-year-old daughter with medical cannabis oil.

Rumer Rose has stage 4 neuroblastoma cancer, which affects the nervous system.

She was given a 50% chance of survival while having radical chemotherapy treatment.

More than 75,000 people have signed a petition for charges against Adam to be dropped.

Rumer has an 11cm cancerous growth putting pressure on her internal organs.

Her dad says he thought he would try something different and researched medical cannabis.

After giving Rumer some medical cannabis oil he says she changed completely and was in much less pain.

He told Australia's Newcastle Herald Newspaper that the oil was having a "miraculous" effect on his daughter.

"What we saw when Rumer was given the medical cannabis oil was nothing short of miraculous," he said.

"She would say, 'Daddy, tummy's not sore' and she would be able to eat like a champion and began to gain weight."

But he was arrested and charged with supplying dangerous drugs to a minor under 16 and is now on bail.

Originally the conditions meant he had no contact with Rumer or her mother but those conditions have been relaxed.

The petition calls on leading politicians in Queensland to drop the case against Adam.

"Medical cannabis has been legalised in many countries and jurisdictions around the globe," it says.

"There is ample evidence to show that it has many beneficial effects for cancer patients without the harmful side-effects and other associated risks of current drug treatments."

The family moved to Brisbane to be closer to specialist treatment for Rumer.

Hundreds of people have been protesting outside the hospital supporting
Adam while the case has caught the Australian national media's attention.

Many people have been using the hashtag #iamadamkoessler.

Fewer than 100 children in the UK are diagnosed each year with neuroblastoma.

Most children who get this cancer are younger than five.


Jul 25, 2008
Reaction score


Oakland-based Auntie Dolores is a well-known brand in the country’s biggest legal cannabis state. The company has been making cannabis-infused edibles, like brownies and pretzels, for California’s medical marijuana users since 2008. Its products, which include gluten-free and vegan options, can be found in 150 dispensaries around the state.

But running a cannabis business in a California can be a very difficult balancing act. "Our laws are just so out of date in terms of how the industry has evolved," says CEO Julianna Carella, a former professional dancer. The system it established "doesn't work in an environment that has this many dispensaries and this many patients."

In 1996, California became the first state to sanction medical marijuana and in 2013 annual sales approached $1 billion, according to a report by ArcView Market Research, making it the country’s largest legal cannabis market. But industry executives complain that the Golden State has yet to implement the kind of statewide regulatory framework that would give clear guidelines to a business like Auntie Dolores.

While dispensaries operate openly in California, the law only explicitly permits cultivation and distribution by non-profit "collective, cooperative cultivation projects." The guidance is vague on how these organizations should specifically function. The questions that arise are as basic as how to transport plant matter to factories and ship finished products to stores

California’s approach is "very gray and we try our best to stay safe and not have any issues arise while we're trying to get the product to the patients that want it and need it," Carella says.

Voters in four states and the District of Columbia have chosen to legalize marijuana and more than 20 allow some access to medical marijuana, but the federal government still considers it an illegal drug with no medical uses. This has led to a confounding legal and regulatory situation as cannabis companies—emboldened by their industry’s apparent support from voters—strive to build brands, create higher value products, and expand into new states.

The situation makes California a less attractive state for companies in this fast-growing industry, despite the size of the market. It’s widely expected that Californians will get the chance to vote on legalizing recreational (what many in the industry call it "adult use") marijuana in 2016.


In Colorado, where medical and recreational cannabis is already legal, the state licenses growers, processors, and dispensaries. It also requires radio frequency identification (RFID) technology to follow every pot plant "from seed to sale," much like companies in other industries track their inventory. This aims to prevent plants from leaking onto the black market but also assures businesses that they are using legal plants. By contrast, in California last year there were dozens of raids on grow sites and dispensaries.

Michael "Dooma" Wendschuh spent the early years of his career in Los Angeles, where he cofounded the company Sekretagent Productions. (Wendschuh and his partner are probably best known for co-writing the first Assassin’s Creed video game, which launched a wildly successful franchise.) When he began exploring opportunities in cannabis, he decided he had to move to Colorado. He’s now a cofounder of ebbu, a Denver-area company that is using pharmacological techniques to develop products designed to deliver predictable and reliable highs, much in the way people know what to expect with alcohol and caffeine. Ebbu expects to brand these products with words like "Energy" and "Chill."

The company also plans to conduct trials to ensure product safety, like pharmaceutical companies run clinical trials for new drugs. Wendschuh says he would have loved to establish ebbu in California but the state’s lack of a clear regulatory environment made it untenable.

"While California is the largest addressable cannabis market in the USA, the risks associated with setting up there outweighed the benefits," he wrote in an email. "Until California drastically overhauls and begins enforcing its marijuana rules, there’s no way an angel-funded technology company like ours could set up shop in their state."

The company is based on the premise that there’s far more variation in cannabis than in other consumer products. When a consumer walks into an adult dispensary she encounters a bewildering number of strains with names like "Girl Scout Cookies" and "Durban Poison." Even consumers devoted enough to know the difference aren’t always satisfied with the consistency.

Within the industry, there’s some skepticism about whether ebbu can, as Wendschuh says, tame the plant. Here the company stands to benefit from cannabis’s odd legal status. Since cannabis is federally illegal, the industry’s products are unregulated in important ways. As is often the case with nutraceuticals, there’s no law that will require ebbu’s "energy" product to make users feel energetic.

But the placebo effect remains a force in this industry and ebbu says its offerings will become more precise with time. "We approach product development like an app for your phone," Wendschuh writes. "We release initial products, and continue to improve those products iteratively and indefinitely." He casts ebbu as a component of other brands, much in the way semiconductor companies like Intel power consumer tech products.


There are now established cannabis brands available in Colorado and California, but expanding to other states where their product is legal is presenting a whole new set of challenges. Since marijuana is federally illegal companies can’t transport the drug from, say California, to neighboring Nevada, which is making its own bid for cannabiz supremacy.

Auntie Dolores plans to address the problem by creating branded kits and sending them to partners in the other states. Take the company’s pretzels: "There's 28 ingredients in that product," says Carella. "We're going to send 27 of them and cannabis will get added on their end…There are so many competent producers out there but they don't necessarily want to take the time to start a whole new brand from scratch."

But it’s still a challenge. According to Travis Howard, principal of the Boulder, Colorado consultancy Shift Cannabis, companies that go the kit route would be wise to ensure that courts in their partner states will enforce contracts for companies that are breaking federal law.

Numerous edibles companies are developing their own variations on the theme of finding out-of-state partners. One of the more glaring ironies is that the ambiguous legal environment is forcing (or enabling, depending on your view) those in the cannabis industry to broaden their footprint far more rapidly than if a company could just have one factory and ship to wherever their product is legal.

California allows medical marijuana but the law has nothing to say about companies like Auntie Dolores that have products available in 150 dispensaries. It’s hard to blame a company for maximizing the opportunity. "It's all workarounds, to be honest," says Carella. "We don't have a legal framework with which to work in, yet the demand for the product is so strong that we just keep going."

Clarification: California law allows dispensaries to operate as "collective, cooperative cultivation projects," not collective or cooperatives, as previously written.


Jul 25, 2008
Reaction score

This Is Where The Investment Opportunity Is Right Now In Cannabis


* Marijuana stocks have been incredibly volatile since the cannabis revolution began in 2014.

* Until 2016, new state legislation will be hard to come by, which will be more of a burden to those companies solely focused on recreational or retail based marijuana sales.

* In the cannabis sector, investors are finding more opportunity with stocks with companies that focus on the biotech space with products in the pipeline for FDA approval Vs state approval.

* Biotech historically has shown a more consistent growth pattern comparatively speaking.

Long has been the stigma that marijuana stocks are something to be leery of especially with how many portfolios have been riddled with losses during the midst of the marijuana blitz. Analyzing the industry as a whole and looking back at the first year in history where marijuana has been legal, we can really study what the good investments were and what trades were not so profitable.

With such a burgeoning space there is way more "noise" that can affect the success of companies involved within this space. These include local business chambers of commerce, political opposition, and federal regulation, but one aspect that flies under the radar, so to speak, has been involvement within biotech and pharmaceuticals. Furthermore, hemp's legal status has made it an attractive target for companies looking to steer clear of the conflicting U.S. law that surrounds the medical cannabis industry.

Look at a company like GW Pharmaceuticals (NASDAQ:GWPH). This is a British based biopharmaceutical company, which has become well-known for its novel approach to pharmaceutical therapy. The company's multiple sclerosis treatment product, Sativex, (nabiximols) is the first natural cannabis plant derivative to gain full market approval in any country. Over the last 18 months during the "dawn of marijuana legalization", this was one of the stocks to watch. Share prices skyrocketed to highs of over $110 per share all while the company continued to make announcements on successful clinical trials.

Since hitting those highs, GW's stock price has pulled back but not to a point of crumbling. The company's recent update on its development program for Epidiolex(NYSE:R) in the field of severe, drug-resistant childhood epilepsy sparked a strong surge in momentum. The update was made in conjunction with the company's announcement on the results from its first of three Phase 3 trials for the investigational product Sativex in "the treatment of pain in patients with advanced cancer who experience inadequate analgesia during optimized chronic opioid therapy".

January 8 was when these announcements were released and on that day alone the stock price jumped 18% from open to high and reached a level above $80/share. This is a price that GWPH shares have not seen since late November and marked the first time that the stock showed signs of reversing from the previous downtrend just prior to the close of 2014. Furthermore, GWPH could be looking at a bull-flag pattern, setting up for a possible break to higher levels. As you'll see with these additional cannabis biotechs, the entire sector seems to be lifting right now.

Currently GW Pharma shows that its burn rate from operations is roughly $1.7M/mo. This is significantly higher from prior years and a potential point of risk for GW. Being that the company is very dependent on its single product, Sativex, investors should be aware that though this is a larger market cap company in the cannabis space, there are regulatory approvals that will still need to be met by the FDA in the US.

This leads me to INSYS Therapeutics, Inc. (NASDAQ:INSY). Monday morning, the company announced progress and "expected milestones" for multiple projects in its pipeline of supportive care and therapy products & candidates. For this company, Insys focuses on a sublingual spray as a delivery method and is moving forward with research and trials for pharmaceutical cannabinoids both for pain therapy in cancer patients as well as treatment for pediatric epilepsy. The company has already submitted an Investigational New Drug application for the pharmaceutical cannabidiol formulation for the treatment of epilepsy.

In a recent press release, the company focused on development in 2015 citing that it will be conducting Phase III studies for its buprenorphine sublingual spray for the treatment of acute pain and expects to complete this by 2016. Additionally, Insys has recorded positive outcomes of its Phase I study of its sublingual spray buprenorphine/naloxone candidate as well as filing an Investigational New Drug application for its ondansetron sublingual spray candidate, expecting it to complete a pilot pharmacokinetic study in the first quarter of 2015.

This mix of positive news, new studies in the pipeline and positive results from its most recent quarterly filing have helped to propel the stock to new highs and continue the latest bull-run. The results include a 90.7% Gross Margin, a 99% increase in net revenues from the same quarter 2013 by nearly $30M, and an increase in net cash provided by operating activities by $20M for the nine month period ending Sept. 30 compared to the previous period in 2013. INSY operates very lean as evidenced by the cost of revenue being only about 1% of the total Gross revs.

Even if the company remains constant with its operations and reports an average of $10m in net income per quarter, INSY operates at roughly 39x earnings. Furthermore, the company operates fairly lean. In line with this, the share price has remained on an upward trend since May of last year. After churning between $22-$24 per share for nearly the entire summer, INSY made an about face and hasn't looked back ever since. As of this report, the stock has managed highs of $49 as of Jan 14, 2015 and doesn't show many signs of pull-back.

As hemp gains more popularity for a source of CBDs, its legal status has made it a very appealing target for companies looking to avoid the U.S. law that surrounds the medical cannabis industry. For instance, in 2004, the U.S. Supreme Court ruled in HIA v. DEA that hemp would be legal to cultivate and process for sale "as a food or beverage in the United States". The 2014 U.S. Farm Bill permitted cultivation of domestic hemp in states like Colorado on a limited basis and just recently Senate Bill 134, to "legalize industrial hemp cultivation and production", was filed and assigned to a Congressional committee on Thursday, January 8, 2015 by Senator Ron Wyden (D-OR) and co-sponsored by Senator McConnell (D-OR), Senator Merkley (D-OR), and, Senator Rand Paul (R-KY). The bill titled "Industrial Hemp Farming Act of 2015" would "remove federal restrictions on the domestic cultivation of industrial hemp."

In both cases (Farm Bill & Industrial Farming Act) the approval of these new bills could make 2015 a banner year for new innovation within the biotech space especially for companies focused on extracting the benefits from hemp. The reason for this is because up until recently, companies manufacturing hemp-based products were forced to import the raw material. Aside from GW Pharma and Insys, other companies are also coming on board and adopting a more biotechnology focused approach to the market opportunity in this burgeoning cannabis space.

Take a company like PEAK Pharmaceuticals Inc (previous, Cannabis Therapy Corp) (OTCQB:CTCO), which has received increased market attention following its name change and recent focus on the animal markets. Recently the company signed a worldwide license agreement with Canna-Pet LLC and a cultivation agreement with a Colorado-based hemp farm. This should bode well for PEAK not only for opportunity for growth in the medical cannabis space but also in the pet markets as well. According to the American Pet Products Association, the U.S. pet industry has grown at an 8% CAGR to reach $58.51 billion by 2014.

Thursday the company announced favorable sales results for its Canna-Pet product. According to PEAK, the company has processed and shipped more than 3,000 orders. A mix of news and financials that hold over $4m in paid in capital, should appeal to new investors as the company itself has such a vested interest in continued progress within the CBD space.

Net cash used in operating activities was $933,475 for the year ended September 30, 2014, as compared to net cash used of $15,567 for the year ended September 30, 2013. According to the company, this increase in net cash used in operations was primarily due to the change in operating plans. Note that share price, market volatility and posting a net loss for the year of $3,758,815 are all very important risks to be aware of when looking at Peak as a potential investment option in the biopharma/cannabis market.

Oxis International, Inc. (OTCPK:OXIS) (OXI.PA) through its subsidiary, Oxis Biotech, Inc. has recently come into the space as well. It appears that following the company becoming current with its filings as well as releasing two very prominent pieces of press, activity in the stock has increased with January 14 seeing the highest volume day in the stock. Over the last 30 days, Oxis shares also have seen highs of $0.039 even with the caveat status on OTC Markets. This was an obvious trigger to take a closer look as seemingly, "something's up".

Over recent weeks, the company has made two announcements that put this on the list of possible cannabis investments in 2015 and both are material in nature. Further diligence shows that not only has Oxis executed definitive agreements licensing certain assets for the treatment of multiple myeloma but the company has also brought on one of the foremost authorities in CBD research especially those diagnosed with multiple myeloma, breast cancer, and even research in the stem cell arena, Dr. Sean Xie (Dr. Xiangqun Xie). According to the website cbdligand.org, "Xie's research work is beyond the proof-of-principle stage since his group has already successfully identified several novel CB2 ligands with nanomolar receptor binding affinity (US patents). The methods and results developed will have a significant impact on the other GPCRs drug research in general. Currently, he has established collaboration with MD experts in University of Pittsburgh Medical Center for in vivo animal evaluation."

In addition to this, the Company also announced that Dr. James J. Mulé, Ph.D. who is a Special Government Employee of the NCI and the FDA, joins that company's Scientific Advisory Board. Among many of his accomplishments, Dr. Mulé is recognized for his translational research studies in cancer immunotherapy. Mulé previously worked with Oxis CEO Tony Cataldo when Mr. Cataldo previously formed Genesis Biopharma (previous GNBP) which later became Lion Biotechnologies. Under the helm of Mr. Cataldo, Genesis came from a penny stock and built enough shareholder value to increase to $8+ per share.

As far as paid in capital is concerned, Oxis shows more of a vested interest along the lines of a company like Insys as opposed to one like PEAK. Therefore it could be very possible that the CEO who took Genesis to "the next level" may have found another company to build as OXIS has continued to gain more investor interest this past week. Despite these achievements and increased market liquidity, the obvious risks unassociated with the small market cap, lower share price, and volatility will also include the fact that Oxis will still need to put in place a plan or outline for what the company will focus on specifically. A strong team to conduct R&D is a good start but as the company has just become fully reporting, the need for more company developments regarding production is needed in my opinion.

As noted in several instances, I've mentioned paid in capital in this article for the simple fact that many biotechs generally are pre-revenue through the multiple stages of R & D and phases of FDA approval. This valuation method has been used because when you're not selling product, how can success be determined? By utilizing "paid-in-capital" valuations, investors can clearly see that amount of capital available to fund a biotech company's research.

Investing in cannabis companies in the US at this point remains highly speculative and obvious risks reach far beyond simple market volatility. As far as biotechs go, drugs not passing FDA approval or even reacting negatively during the trial periods can put a huge barrier up for a company. For the cannabis industry as a whole (even though it doesn't necessarily effect biotechs) federal regulation can change at any point and time so just as the government made certain aspects legal, they can easily overturn those to make them illegal. The main point is that by investing in reputable companies focused on biotech may produce significant returns in the current climate as many states have not legalized the drug for over the counter sale.

The real investment right now I feel is in the biotech side of the space. For one, as far as regulatory issues are concerned, these companies do not face the same state-by-state restrictions that many typical marijuana based businesses face. Much of the studies are funded by government-sponsored funds and thus would have to meet the criteria of organizations like the FDA. This makes biotech a great candidate through 2016, which is when the next elections are planned & potential legalization votes go back on the ballot. Second, the biotech space is growing at an annual rate of 11% (market revenue is just under $300B according to IBISWorld). Finally, The Arcview Group forecasts that the legal marijuana industry will increase to $10 billion in 2019, so there is obvious opportunity within the industry just as it is beginning to grow. As history has proven with growth driven industries, the first-movers who take an early foothold manage to gain the largest market share. What companies like Google and Apple have done for tech, cannabis biotechs like those mentioned can do it for the marijuana industry.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.