Cannabis conversation: solving compliance issues in cannabis.

Katherine: All right. Well, this is my first webinar hosting session. Hopefully, I don't blow it too much, but Katherine Lagow, President of TrueGreen Global. We are an RFID smart packaging company that also has a SaaS platform. In a previous life just before this, I was in charge of a multi-state operator standard wellness. I was the VP of Operations and then VP of Marketing there. I have experience operating and dealing with the compliance world for four years there and now switched to the other side to help operators like myself solve these problems. I'll let Tim and Mark introduce themselves.

Mark Nye: All I got to do today. My name's Mark Nye. I am the Vice President of operational compliance for Parallel, which is the parent company of New England Treatment Access. If you're in Massachusetts [unintelligible 00:11:07] wellness, if you're in Florida Goodblend if you are in Texas or Pennsylvania. Prior to coming on with Parallel for about four and a half years, I was a Director of Compliance for the Ohio Medical Marijuana Control Program at the Ohio Department of Commerce. Prior to that, I was a Special Agent for Clark County Nevada who was assigned to compliance enforcement and licensing for all of the cannabis businesses in that jurisdiction.

Spent a good chunk of the last seven years on the public sector side of the cannabis industry, government side doing compliance work, and now I'm on the private sector side doing the same job in reverse.

Tim: Excellent. You two are both a tough act to follow, I'll do my best. Tim Daley, co-founder and Chief Strategy Officer for TrueGreen. My background for the last decade is RFID technologies and [unintelligible 00:12:02]. Founded the first SaaS platform company, ThinAir back about a decade ago. [unintelligible 00:12:11] was the NSC evangelist for NXP semiconductors. Then with the TrueGreen team, we've started to apply intelligent packaging with SaaS platform to the cannabis marketplace to benefit the key stakeholders. Of course, regulators and government, producers, and consumers. I'm really excited to be with you both and everybody who join us.

Katherine: Just kind of a roadmap, we'll spend probably 40, 45 minutes talking through some topics that we've outlined, and then we'll spend the last 10 or 15 on questions. If you have any questions or anything you want to throw into the chat, we will compile those and then we'll run through them at the end. Although, if there is something that we feel like we should address, while we're chatting we'll jump into that too.

This is really exciting for me and before Mark took this job at Parallel, he and I worked together on opposite sides at the table, or I guess, worked against each other some days it felt like. I was obviously as an operator at Standard Wellness and Mark was on the regulatory side in Ohio. It's exciting for me to get to do this now that we're both on the same side and can discuss these things.

One of the first things that I was curious with Mark was, as we talk about compliance and all of the issues and the traps that you can fall into, since he's seen it from both sides as a regulator and as an operator. What are the common mistakes are that we see operators make those are in any industry or across any state, what those mistakes are and how he has seen technology either help or make those things worse.

Mark Nye: I would say one of the biggest keys is communication with your regulatory bodies, where I see a lot of, a lot of folks maybe a little shy about those interactions. If you can open up a dialogue with your regulators instead of the radio silence if you're going to understand what their expectations are. You can't comply with something if you don't know what it means. If there's areas for interpretation of a regulation or if your agency does a lot of extra regulatory communication, issuing things like guidance documents, newsletters, stuff like that. If you don't know what their expectations are, what their interpretations are, you can't work those into your operating procedures in any meaningful way.

I'll cite some examples. When I was with the Ohio program, there was an MSO that was awarded a license to build a cultivation facility. We had a nice intro call. I introduced them to my staff at the program, outlined what our expectations were, and then it was radio silent for about 10 months. Then one of my field inspectors gets a phone call and says, "We're ready for inspection, send down a team for our commencement inspection," which I did and three inspectors arrived on site, the building was about 40% built.

My staff looked at them and said, "Well, where's the rest of it," and their answer was, "Well that's phase two." The answer to that statement was, "Your application for licensure in the state of Ohio said nothing about a phase to build out. We are bound by the regulations that we wrote to hold you to the substantive content of your application. Until you build the rest of that building, you're not ready for inspection." That question is one that could have been answered very early on if somebody had just picked up the phone, called their inspector, called me. I realize full well that that's not possible with every regulatory agency.

There are some that are not nearly, I can say this now on the operator side that some of the regulatory agencies are extremely difficult to communicate with. It really just depends on who's in charge and what their approach is, but that's a very common mistake is the radio silence. It's that hesitance to talk to your regulators and to engage with them. You're only ever going to control your side of that interaction, you can't make them talk to you if they don't want to. There are some states that I've dealt with, that don't communicate with their licensee base in any meaningful way.

That causes difficulties on both sides of the table. I've advised legislators and legislative committees and regulatory agencies in some of those states as to why they might want to consider changing that approach. Again, if their goal is to keep industry operators in compliance, the easiest way to do that is to lay out their expectations in a way that can be understood. People like me and my staff can sit and take that and work that into standard operating procedures, into work instructions, into policies so that we make sure when we're training our employees. They don't have to think about the compliance end of it.

That's already baked into the standard operating procedure because my team has taken the information that we have and operationalized it. That's definitely one common mistake you have to talk to people.

Katherine: I think the industry's so new from every aspect. From the regulatory side, [inaudible 00:17:43] operational side, it's really new. I think a lot of times you have operators that mistakenly assume that regulators are well versed on all of this. They know not just what they're doing, but how to do it. I think even more importantly, that regulators understand how my operation works. They understand the nuances of it, and I think because of that, a lot of times the communication and the over-communication can be really helpful. Whether it's Ohio where your regulations are written into your application or another state that's more flexible, you kind of sit.

That's something I learned pretty early on is that the people that I'm relying on to help me navigate these rules don't even necessarily understand how they affect my business practically on a day to day or at a large scale. A lot of times having those common-sense conversations with regulators and just saying, "Hey, this is how this is impacting us right now., it really doesn't make any sense how do you want us to deal with it." "Oh, well, why don't you just write a variance, and we'll fix that and then you guys don't have to do that piece of it anymore." That's great.

That's a huge hurdle that I don't have to jump over every single day now. I think we have this mindset like, "This is the rule, this is the regulation and Mark's the one that handed it to me so I have to follow it." Versus trying to have an open dialogue. I think it helps a lot for sure.

Tim: Katherine and Mark, I actually have a question from you. Mark, from your perspective on the regulator and policymaker side. How would you describe the regulators in terms of embracing and understanding technologies and how it can make their jobs easier and potential producers and consumers' jobs easier?

Mark Nye: Speaking from experience with two different state agencies and then other ones that I've advised and consulted with as they were building their programs. I would say that, by and large, there tends to be an overestimation of what technology can do for you as far can it really keep the industry operators in compliance? Is there a way that we can configure it? I'll cite an example. Some of the inventory tracking systems, when you talk about those systems, the industry operators are not their client, the states are their client. If we're talking about a system. I'll use metrics. Metrics are a widely used inventory tracking system. The states are their clients. When a state signs on with metric, they will sit down and do a fit-gap analysis, do a regulatory analysis and say, "Here's what your rules say we need to track, and here's how we can configure your state's instance of metric to do what you need it to do." That is generally, undertaken without much regard for the industry side and how the industry uses it. Which is why we end up getting stuck with if there's 150 data points we need on every harvest and the state's inventory tracking system is really only configured to collect 15 of those because that's what the state cares about.

Where do the other 135 come from? If my math is right. We end up having to use third-party integrated systems via API to push the data that the state wants into the state system while we're over here monitoring all the stuff that is pertinent to what we have to do. To the original question, I think that there's a little bit too heavy of a reliance on the regulator side for the technology solutions. There still has to be a baseline understanding of how the industry operates, and how it works. A lot of that comes from just seeing it firsthand.

I'll tell you mostly the field staff in a lot of regulatory programs, those are the ones that understand it the best. Because they're the ones that are in and out of the facilities every day, talking to the people, inspecting the facilities. They're the ones that end up getting all of that real-world boots-on-the-ground experience with how the industry operates. I think that there's an overreliance and an overestimation, "Oh, we have metrics so everything's taken care of, or we have MJ freeway so that takes care of everything." You still need to configure it to meet your regulatory needs while also not hampering what the industry has to do in order to meet those obligations.

Tim: Well, yes, your point that it's a regulator-facing only solution is interesting. Because that's certainly something that I have heard at all the producers that I've spoken to that yes metric is great, but it's not really giving me business intelligence that adds value to what I do. It's not performing inventory of packaging. It's not tracking shipments from the producer to the dispensary. It's really not providing any customer-facing value, i.e. COA, et cetera. That's a very interesting point you made.

Katherine: Yes, and like Mark said, it's intended to serve a different purpose. If you're the regulatory body you think about all these states that have passed initially it's medical marijuana and what are their concerns. Their concerns are diversion. They think that everybody that's an operator and everybody that's not is trying to sneak this cannabis out of the facility and sell it on the black market. Their concern is almost entirely diversion and controlling where they think plants are or are not going. A little bit ironic that they're like, "That's our number one goal and that's our number one priority. We have metric to do that." I think as you dig into metric like you said, Mark, and Tim, it really, first of all, only goes so far.

It's not a seed to sale. It's a seed to packaging at a facility more or less and then even still data and metric is only as good as the person typing it into metric. I can type whatever I want into a metric that doesn't mean it's true I can completely make up what I'm putting in there. It doesn't mean that it's true it doesn't mean that that information is accurate. The idea that a regulator can spot diversion or theft through metric is also quite unlikely. If most of the time we were talking about it, the other day, most of the incidents that we found out about that had something to do with diversion or theft. It's because somebody gets fired and goes and tell on tells on somebody.

You have to pull it up and see it you never notice it in the system. Having to overlay your metric. The metric is there at least they think to prevent diversion and theft. It doesn't have anything to do with business efficiencies or creating opportunities to optimize your supply chain or anything like that. Everybody from a technology stand standpoint has something that they integrate into that. That segues a little bit into one of our other topics that we were going to talk about, which is the segmentation of technologies in the industry. Forget for second crossing state lines and having 10 different systems in 10 different states because of the [unintelligible 00:24:32] and what's integrating.

Just purely from the technology side mark and the different technologies, and how they all have to overlay because of how segmented the space is. Do you see companies getting better at the compliance piece of that? Do you see technologies helping or is it in my experience, the overlay is purely for efficiencies as a business, and they haven't really figured out a way to make it helpful in a compliance way, but just curious what your thoughts are?

Mark Nye: It's definitely difficult. MSOs are basically doing business in different countries because every state has their own rules, and their own regulations, and their own systems. If as a business, you are able to find a single unified software solution that will integrate correctly with all of the multiple state systems that you're required to integrate with. Or that you're required to put data into, then you end up being in a good spot. There's obviously heavy development work that goes into that, on that solution side not that it can't be done. Then you have some states will come in and throw a monkey wrench into that and say, "We're not going to allow you to integrate via API with our state system of record."

Pennsylvania, doesn't allow API integration. You have to use MJ freeway directly, it puts you at a disadvantage because now as much as you may be trying to unify your approach across markets, now you have one standout market. Where you have to have people using a completely different software system, or doing duplicative manual entry into two different systems. The state system, and then the system that we need to use to know everything else that we need to know about our business. The answer is we just deal with it. Really it is we're kind of stuck. Every state is going to go their own way for the foreseeable future. It, definitely, causes us difficulty as operators, but it's really common.

Katherine: [crosstalk] onto that also that even, let's say, hypothetically, you can find one system that all the states you operate in allow. Even still, because of the fact that states compliance and regulatory processes and requirements are so different, my SOPs are going to be entirely different in Ohio than they are in Missouri and then they are in Utah. Even testing alone they're entirely different procedures. Having technology that unifies all of those and then spits out data in a way that's consistent is also quite challenging because when you package things in one state and in metric, it's different than when you package things in another state in metric.

Finding ways to use that technology, even around all of the speed bumps of SOPs, it's not that it's not helpful because of course it is you're doing your best, but it still presents this how do I compare? I'm comparing apples to almost apples even then it's not great.

Mark Nye: No, that's absolutely right. Let's say, for the sake of argument, that you were a startup MSO and just decided, "We're only going to work in states that have metric," every state's metric instance is custom configured for that state's regulations. It's still, to your point, even if the system is the same, it's configured differently, the data is mapped differently. It's really difficult to envision ever. I say ever. Right now, it's really difficult to envision ever having a single unified software solution that works across all markets. It's tough to think about it in those terms.

Katherine: Yes. Out of curiosity, how many technologies do you guys currently use in terms of integrating into the seed to sale in the various states you're in?

Mark Nye: I don't even know [chuckles] there are several. The systems we use we'll use things for tracking cultivation and processing data. We'll use systems for point of sale, for taking delivery orders, processing incoming online orders for pushing data into the state system. I'll use a state like Florida, as an example, they don't have a state system of record. We're required to have a seed-to-sale tracking system at a point-of-sale system that logs everything we need to log.

That pushes the appropriate data into the medical marijuana user registry I think is what it is in Florida. It's not that every operator in Florida can use a different one, and it's not pushing the data anywhere. It's the state has to know that you track things, but they're not coming in and auditing because they don't know what to audit against. Everybody can use whatever system they want to use.

Katherine: Yes. Interesting. I think, at one point, I did actually right before I was leaving to join TrueGreen, I was thinking through what are all the different technologies and the different systems that we use. Because this TrueGreen to me is super exciting as an operator because it gives insight into one, it does help from the compliance standpoint, from the regulatory standpoint. For me as an operator, it was the opportunity to collect data and to understand my supply chain, after it left my wholesale facility in a way that I can't right now. Of course, as I'm thinking through that, I'm sure there are plenty of other operators that would love to be able to use this data tool but how many systems do all of these companies already have to have?

How many do they also have to lay over them to give themselves data and to give themselves information? Then is this another one or do we overlay, or do we remove them? You look at a state like Ohio, where department of commerce regulates cultivation and processing, and then Board of Pharmacy regulates dispensaries. Now you have twice as many systems in this state, just from that standpoint. I think the technology piece of the industry, and I'm happy to see in the last few years that a lot of ancillary businesses have started creating those common-sense solutions that every company and every other industry has.

Even if it's just an HR platform that you don't get kicked off of, because you're a cannabis company, and all of that. I'm happy to see that they're starting, but I also see the segmentation of it, it's becoming such a burden on companies. You have to have 25 different systems to be compliant and have analytics on your supply chain. That's crazy where it's just a very unique, I think, issue that we have here in the cannabis space. Tim, you've been involved in technologies and various industries. How have you seen evolution of technology within those spaces as industries grew?

Tim: It's a great question and so my personal experience has been through all CPG FMCG, pharmaceutical, and then last three years cannabis. I think it's when you digitize an individual product in this case, talking about cannabis packaging. You then associate all of the metadata that lives behind it. To Mark's point, whether it be a metric or BioTrack or MJ freeway, so all that provenance, that data follows each individual package. The ability to identify a package. For business intelligence, for your producers to know exactly where things are live in real-time.

For a dispensary to be able to do live automated inventory is incredibly valuable, for a regulator to have that visibility. To cap your point earlier about diversion in black markets, to leverage technologies like we are such as NFC and UHFRFID, to authenticate that a product is exactly what it says it is in the cloud. To know whether it has been opened or not is a very powerful tool. What I'm finding and how it's changing, not only the cannabis industry, but how it's changed other industries is, it levels the playing field for all players. Metric is a great plant to packaging solution for the regulators.

They're great, but you need to add value to the producers. You need to add value to the consumers. When you digitize packaging like we're doing and rolling out throughout the cannabis supply chain, you create that direct connection between a brand and consumer. Delivering things such as a specific analysis is incredibly valuable, helping somebody to understand dosing, to understand the side effects of a product incredibly valuable. For a producer, gaining that sell-through and selling business intelligence that some dispensaries may not provide to that producer is incredibly valuable.

From a regulated perspective, knowing that diversions are eliminated, knowing where products originated from and being able to track them back. Knowing that they're authentic, knowing that they've never been tampered with, and knowing that producers are compliant with their marketing messaging, that's all very valuable. We've seen that in shopper marketing for CPG. We've seen that in medical, where in countries like the EU now has a mandate that pharmaceutical packaging requires digital tamper detection. This is the way it's going. I believe the number one and number two, most duplicated and counterfeited items in the world are labels and then pharmaceutical products. Think about that for a second.

It's really easy to produce an optical code, a barcode, and a label and slap it on a product and counter it. There was something that we don't know what it is. It's terrifying when you're talking about a pharmaceutical or some other consumptive product like cannabis. It happened three or four years ago, the vape pens that were counterfeited with, I think it was vitamin E oils in there and people were dying. I think companies need to embrace technologies. This is one of the ways you solve the big problems in this industry, and you level the playing field for all stakeholders. I think certainly that's been my mission and my mandate since day one.

Katherine: Yes, no, I think that makes sense. Mark, I'm curious from your perspective, over the last, I guess, seven years or so since you've been doing this have you seen a shift in the mentality of the regulatory bodies as it relates to compliance from this innate fear of diversion and theft and feeding children cannabis. To more compliance in terms of real-life dealing with inventory and less fear-based and just more working with operators? Or do you feel like a lot of the compliance and the regulations in most states are still based on and pushed by a backing of we can't have this being on the black market?

Mark Nye: Oh, that's a loaded question.

Katherine: [inaudible 00:36:28]

Mark Nye: I would say they're learning when these programs initially get built, they think they have to care about everything. They being the agencies that are putting these regulations together. Whether that's a board, a commission, a department of commerce, a department of health, a board of pharmacy, a pharmacy, those types of things. At the beginning, I think they don't necessarily know what they should care about so they will take concerns that come to them from legislatures, from external stakeholders and say, "I care about this, write a rule about it.

I don't want a cannabis billboard within 1,500 feet of my kids' school. I don't want people in licensed grow operations growing more than they can sell and then diverting it into the illicit market." I think that over time they start to see what does and doesn't happen. I think diversion on the scale that most regulators are afraid of, it's extremely rare, and it depends on the state. I'll say a couple of the states that I've talked to when they're setting up these regulatory programs, have different goals. A state could have a goal to say, "All right, well, we want to enact a medical program by legislative action, and the reason we want to do that is minimal availability. We want to hold off adult use for as long as we possibly can."

That's been done in a couple states. The other way that you could go setting up one of these programs is to say, "All right, we realize we have a lot of people growing and selling cannabis in the borders of our state. We want to bring them all into the regulated market." I was speaking to a former regulator from Oregon. That was their goal, which is why they gave out a ton of permits. They put the barrier to entry reasonably low, but the consequence of that is overproduction. When you have overproduction, now you have things at scale being diverted into the illicit market.

A lot of the cannabis in the illicit market comes from Oregon because there are a ton of people producing it, and they're producing more than they can sell within their borders. Again, they learn what they should and shouldn't care about, but that's not necessarily to say that they can do anything about it because changing rules is not easy. There's a couple of states that have been operating on temporary regs on emergency regs. Those are marginally easier to change than a permanent or a regulation that's enacted through standard process.

Anything that's enacted through standard process has to be changed through a standard process, and that generates a lot of attention from legislators, from their constituents, from external stakeholders. It's an uphill battle to get things changed. I'm sorry. Yes.

Katherine: I was saying the people they report to in their specific state and what's going on in their political career at the time.

Mark Nye: Exactly everybody's got a boss.

Katherine: Absolutely. No, I was just curious, because I think like you said every time a state launches, everyone's biggest fear is that the operators intend to overproduce, and sell it on the streets. People who don't have medical cards are going to start buying this from their friends and their friends. I always think one, it's funny because medical cannabis is much more expensive than the dealer down the street. Because we have testing requirements and all of these regulatory requirements that we have to go through, but it's a safer product. I think bridging that gap between the compliance and all those hoops that you have to jump through that really make this such an expensive industry, to a regulatory mindset that is more focused on common sense and business practices. I think it'll be interesting to see how that evolves over the next five to 10 years. I'd like to say three to five years but I think at this point I should say five to 10.

Even at the federal level as we start to see stuff move, I think just seeing states embrace technology in a way that's helpful to them but to the point you made, it does make a lot of noise. In most states I don't know if you kept up with the Missouri lawsuit and the constituents in Missouri suing because there was no language in there that stipulated price for the tags I think is what it was. Then you had metric got put on hold there. Metric got put on hold because the argument from an operator standpoint was you can't require me to pay for these tags and the state ended up winning, but even that, it becomes hard.

It does create a barrier for regulators when operators are fighting you on those systems as well. There are plenty of operators that don't want to use them that would just prefer to continue operating the way they did before they had a license, so I think-

[crosstalk]

Tim: I think we agree though, Katherine, that if the goal is to bring value to the operators through additional business intelligence and efficiencies, you would think that they would embrace this.

Katherine: Oh absolutely, and I think there's a difference to the point that Mark just made, there's a difference between embracing it and having the authority to affect change. I think that's oftentimes where the ball stops. Is the person you speak to in any given state who is in charge of a program might absolutely love a new technology and think it would be great to implement it and think it would be great for both parties at the table but that doesn't mean that whoever he or she reports to has the appetite to see this in the news for the next six months while the discussion continues. That really does oftentimes, the the politics of this industry still I think impact the compliance and the regulations of it to a very large degree.

Mark Nye: Well, that's absolutely true. It's funny that you put it that way. I couldn't agree more that when you talk about as being someone who's been in a couple rooms where I've been that guy who was proposing something, if the thing that you're proposing could be remotely viewed as something that could favor the Cannabis Industry, you've automatically got an optics problem, and you've automatically got an uphill battle.

It may be a fantastic solution. It may solve a ton of problems but if it solves two or three problems for the regulatory agency or for the government side but solves 15 problems for the industry side, you're going to have to work really hard to sell that idea because of how it's going to be perceived. How it's going to be perceived by the executive branch, by the legislative branch, by their constituents that said, "Oh, you did something that made life a lot easier for the Cannabis Industry."

I've survived some seriously Cannabis hostile administrations in my time on the government side and they are not really jumping to do the Cannabis industry any favors anytime soon. Again you're always going to have to deal with the politics of it and a software solution, or a new policy or something could be fantastic and could solve a ton of problems, but if it's viewed as industry friendly, you've got a lot of work to do selling the idea.

Katherine: Yes, which is crazy. No other industry deals with that kind of thing for the most part. It really is. When I was reading a press release earlier about the initiative in Delaware getting struck down, and the governor's statement talking about how it's not right. It's not what's right for the state and and the youth, and I'm just obviously not to go down this rabbit hole but thinking, "Okay, but tobacco and alcohol are what's best for your youth?"

I think it's an argument that gets used a lot, and it does it becomes such a huge piece. The policy, the politics of it becomes such a huge piece of compliance in the way cannabis companies are treated and regulated, and hopefully we start to see that change but not that any of us can do about that.

I want to go back just for a minute to one of the first questions I asked you, Mark, which was, what are some of the biggest compliance mistakes that you see? I know you're in a new hat now so you're not on the regulatory side but aside from the dialogue and being afraid, let's say, to speak to your regulators about issues that you're having or just your SOPs generally, what would be some of the bigger mistakes from a compliance point that you see companies run into?

Mark Nye: It works in the opposite direction. I know I had already mentioned that, I feel like my impression is that on the regulatory side that sometimes folks are too reliant on technology or they think that it can do things that it can't do, they use it as a security blanket. I think the industry side can do that as well. I'll use an example. There was an instance of metric in a state where laboratory testing was selected by category. Microbials, heavy metals, potency, things of that nature because it was configured to do that on the regulatory side. Now a system is garbage and garbage out. It's only as good as what you put into it. It's only good as the data that you put into it. A laboratory technician, shows up to a grow facility to take samples for lab testing. What that does in that system is when a test package is created, it locks that batch in the supply chain so that it can't move forward until laboratory passing lab results are entered by the lab. That then releases that.

The mistake that was made was a manual one. The laboratory field tech wasn't versed on the regulations, the person that was from the cultivation facility that was overseeing the collection of the sample was not versed on the regulations and said, of the panel that's required by law, I only want-- I'll use potency and microbials for this one. That's what they selected and that was what was associated with that test package.

When the laboratory entered the test results, it then released a package that had probably 15 or 20 other tests that were required by regulation that hadn't been run. That material made it to a dispensary and got sold and triggered a massive recall, and the operator was fined well into the six figures for that mistake. When we're talking about mistakes over reliance on technology and insufficient understanding of what the regulations are, it's like you can't just go into a grow facility and be in charge of inventory and say, "Well, if Metric lets me do it, that must mean it's legal."

If it's configured to stop you, if you're breaking a regulation then yes that's true. If it is not configured to stop you when you're breaking a regulation, there's some more brain power that has to go into it and you have to have people that understand, you have to have standard operating procedures that instruct people on how to do these things correctly. That's another huge one. It's the overreliance on technology but also not optimizing the configuration to do what you need it to do. If it's compliance geared, it needs to be configured on the regulator's side to force compliance where that's appropriate.

Katherine: Yes, it's a great point, and I think it's it's a lesson that I learned the hard way, I would say, when I started running operations at Standard Wellness. If you figure it out pretty quickly, you're not going to make the same mistake twice but there are a lot of things in Metric that it blow-- I think the most obvious one in Ohio is that you can actually package and manifest a product out to a dispensary that doesn't have passing test results because Metric just allows you to, versus that should be something Metric doesn't allow you to do.

I shouldn't have any employee regardless of what level they're at in the company that can physically create a package out of something in metric that doesn't have passing test results but you're right. I think just like we say with the regulators that there's an assumption by them that metric will help them do their job or do their job for them in a lot of ways. I think you're right, the absolute same thing is true on the operator side that we think because we are compliant in Metric, everything's fine, because this is in Metric everything's going well and there are so many additional layers to that and it only does so much.

That doesn't even get into the QA side of all of this. This is just quite literally, did you pass or did you fail? I think we are supposed to open it up to questions here any minute. Mark, do we have any-- Mark Symponia. Sorry not Mark [unintelligible 00:49:46], you don't have to answer that. Do we have any questions that have been sent in? If not we can keep chatting.

Marc: None at the moment, but if anyone wants to ask any questions, you can drop it in the chat or you can drop in the Q&A tab on the bottom, and we can field those.

Katherine: Okay. Mark, give me your funniest compliance story.

Mark Nye: No, I can't do that.

[laughter]

Katherine: [unintelligible 00:50:11] no names, no states, no identifying information--

Mark Nye: Oh, see? Now I'm on the spot. Now I'm going to have to think about it. I'm going to have to think about that for a minute because there have been some interesting ones, there definitely have been some interesting ones, I don't know. I'll have to think about what constitutes funny or if it's just me that thought it was funny.

Katherine: That [unintelligible 00:50:32] perspective, yes. I was just trying to think of any of mine, but as an operator most of your compliance issues are inherently not funny because they usually involve you having to spend money or talking to Mark and I on the phone for three days in a row to clean up a mess that was created. I don't know that I feel as-- even at this point, I'm far enough removed from any of them that they're funny, but hopefully I'll think of them as funny one day.

Okay, Stephen Walsh submitted a question and it says, "What is your best guess as to what the future of regulation looks like at state and/or federal level?" I can jump in on this one, Mark, and then you can jump into if you want. From a timing standpoint who knows I guess, but I have always taken the position that I think cannabis will unfold just like alcohol. A lot of people forget that there's no federal drinking age, that the federal government doesn't tell us we have to be 21, every single state does and they have their own rules.

Louisiana was the last. They only changed the drinking age from 18 to 21 because the federal government said they couldn't have their highway funds, unless the drinking age for those driving on the highway was 21. I think you'll see a very similar situation unfold here. You have a lot of states that have invested a lot of money, a lot of time into building these infrastructures and I don't envision a world where that is all wiped clean. I think you'll see a de-scheduling and then just like alcohol states get to regulate it in the way that they want to regulate it and the way they see fit.

Tim: I think things like the safe banking act are critical now, and they're very reasonable small steps that can be taken at the federal level where there's bipartisan support to bring the cannabis industry into the banking fold. I think we'll see little steps like that before we see full-on legislation.

Mark Nye: I agree with both of those points. I'm always cautious about commenting on federal legalization or de-scheduling or decriminalization. There's about 10 different ways that it could look and I feel personally like it will make things initially more complex, not less complex. The temptation to compare to alcohol is always there and it's another thing that I'm cautious about because I think that there are some regulations-- There are some ways where it makes sense to regulate cannabis like alcohol. Then there's far greater number of ways where the two it's completely apples and oranges.

Tim: [unintelligible 00:53:11] warehouses

Mark Nye: Yes, exactly. I mean that's the kind of thing I'm talking about. Some states that are basically in the liquor business with the state being the liquor distributor and stuff like that stuff doesn't work for cannabis. Again I think if you want people to be 21 in order to utilize the product, that's fine, but that's I think about where the comparison stops. I think, Katherine, to your point we will see the same type of patchwork of state level regulations, and I think it'll get more complex before it gets simpler, but banking would be a huge first step.

Katherine: Yes, that's a whole other webinar that we could dig into. I was just thinking Adam Goers has a whole soapbox about people talking about cannabis. I reminded myself the other day that I have to stop saying that the alcohol comparison works when we talk about the patchwork of the frameworks of the cannabis industry. It doesn't extend to the bond warehouses and the whole concept of how alcohol developed at a different level that I don't think most people even understand, and I can't remember the name of the book that he said we all had to read. I can hear him watching this right now saying, "Katherine, don't say that we want this to look like alcohol."

Just to clarify, there's a difference there, so certainly I'm not implying that we want the same thing from that standpoint. Yes, I think that each state will have their own regime. Just like now I can't get my favorite wine from California shipped to me in Ohio, but I can ship it to my brother in Illinois and he can drive it to me in Ohio and that's completely legal. I'm sure we'll have plenty of complications to deal with when hopefully the day finally arises.

[crosstalk]

Tim: I'm sorry, somebody speaking?

Marc: Sorry, Tim, yes. I was just going to say we do have another question that came in. I think it's similar to that question, it came in the chat room. I'll just read it out loud. "If federal legalization occurs, what kind of interventions have been proposed to help with compliance if any?"

Tim: Yes, I mean we're members of the USCC, US Cannabis Council and at the recent CEO summit, we reviewed all the various proposals and had-- We're fortunate to have legislators from both sides of the aisle come in and brief us on their positions. I think that from what I saw, there's clearly an interest in from both sides of the aisle to legalize cannabis. The question is, is do you involve the FDA, is it a big brother approach, how do you tax it? There are a lot of nuances that I think are a long way from being solved.

Again, I like the safe banking bill, it's a bipartisan bill, I think it will get through. I think representative Nancy Mace in South Carolina has a very interesting bill that I believe is called The States Act that essentially gives the States the power to enact things in the right way and the federal government will take a back seat. I think there's some interesting things but it's going to take some time. Anyway that really didn't answer the question.

Katherine: No, no, but I think it heads down the path from a compliance standpoint, this isn't something anyone's thinking about right now, right? When we talk about compliance, talk about if we are going to allow Ohio to ship to California, we are so far behind in the conversation of federal legalization that no one is discussing any of that at this point. It's, "Can we get [unintelligible 00:56:51], can we get any kind of de-scheduling fixed? Not, how do we regulate this once it's fixed?" I think that's what Mark was hinting at earlier when he said, "This is going to get a lot more complicated before it's easier," because it is.

Everybody in the US knows how old you have to be to drink and for the most part, where you can buy alcohol or cigarettes or whatever that looks like. There are certain people that can and cannot do that and states obviously have their own regime around it. Cannabis does not look like that yet, there is no standardization of anything. A cigarette in California is for the most part the same as a cigarette in Texas. A 2.83 grams in Ohio is not anything like 2.83 grams in California.

There's a ton of standardization from compliance to products, to consumption, to all of that that hasn't been discussed. I think that is a long ways out because we're so far behind in those conversations. There's [unintelligible 00:57:51] anymore. [unintelligible 00:57:53].

Tim: You have the things like the unintended consequences with the Hemp Bill or the Hemp Act that are effectively allowing producers of Delta-8 to slip in and to sell underage children at convenience stores?

Katherine: Yes.

Tim: It's scary.

[crosstalk]

Katherine: Tim's lining up all of our next webinars here. He's got safe banking, he's got Delta-8. Mark, do we have time for one more question because I think there's one in here or do we [unintelligible 00:58:21]-

[crosstalk]

Marc: There is one more. Would you like me to read it?

Katherine: Sure.

Marc: Sure. There is talk in Florida about implementing dosing limits on the different routes of administration or inhalation and edibles et cetera. Why do you think this is? Are you aware of any other states implementing similar limits?

Katherine: Mark, I'll let you jump in on that one.

Mark Nye: Yes, I think as far as the why, I would say a major motivating factor is accidental over consumption of edibles because it happens everywhere. Some states have solved this by saying that you have to have lines of demarcation between doses. Let's say if it's an edible product, let's call it a chocolate bar that if it's 100 milligram bar you have to have it segmented into 10 milligram pieces, or if it's the adult use market in Massachusetts that any single portion is capped off at 5 milligrams.

I mean I think those things can be useful for newer cannabis users so that you know how much you're ingesting that an infused edible it's not the same portion size as an uninfused edible. If you're talking about something like a chocolate bar-- If I had a Hershey bar right now, I would eat the whole thing. If that was a medicated or an infused chocolate bar, it would be one tiny little corner. I think that newer cannabis users tend to think, "Well, the infused versus the non-infused, what do you eat? You eat one. When I eat one, chocolate bar I'm not--" I think the motivating factor is really to help people understand how much they're consuming at one given time. We've got things like the Start Low Go Slow campaigns where if you are consuming edible cannabis products to start and to wait, take a long period of time to see how long it takes to start affecting you before you consume anymore. I think that's [unintelligible 01:00:27]

[crosstalk]

Tim: That's also part of creating a digital connection between producer and consumer to do things like educate them on what is an effective dosing, what are the warning signals, what to do, God forbid that you are overdose. I'm a huge fan of transparency and I do think that in cases like that, technology serves a significant purpose and value to all constituencies.

[crosstalk]

Katherine: Absolutely.

Mark Nye: It certainly can.

Katherine: Oh yes. Sorry, Mark.

Mark Nye: I was just going to say cannabis consumer and cannabis medical patient education is there are massive opportunities there. We've still got very large portions of the market that are buying flour based on the THC number they see on the label at all. Thinking that, that THC content in flour is the sole indicator of product quality. That's one of the reasons I get so cautious about when these legislative pushes come to regulate like alcohol because if you have 12 ounces of beer, 12 ounces of wine, 12 ounces of whiskey, those are going to affect you in pretty different ways.

We've got studies coming out that's saying THC percentage in flour, yes, it increases the THC in your blood plasma, but it's not directly correlatable to a state of impairment. If the people writing the regulations and writing the laws think that a higher percentage of THC in an inhaled product is directly correlatable to a more severe state of impairment, they're going to write regulations that have that baked into it. Ohio did that as well with with some-

[crosstalk]

Katherine: 70%.

Mark Nye: Putting these percentage THC caps on products that are not bought, sold or consumed by the percentage of THC it doesn't make any sense, but you've got to educate your patients and your consumers that are buying these products from you so that they understand. If there is a technology solution that eases that process, I think that, that goes a long way towards sort of getting some of the nonsensical regulations changed to the ones that just aren't helping anybody.

Katherine: I am far from smart enough to articulate this to the length that it should be, but there's also a piece in here as we talk about the bioavailability of medicine and the forms that it comes in. A spray or a tincture that is water soluble, that is particle size that's much smaller. It gets absorbed into your bloodstream faster and a much larger percent of it gets absorbed into your bloodstream than a gummy that isn't water soluble or flour even.

The way that these kinds of medicines affect you and that your body metabolizes them in different forms it's pretty significant. We see it a lot-- initially when Standard Wellness started we had a regular gummy made from distillate and then we had a water soluble gummy that was rapid onset. We ended up having to actually make a disclaimer to people like, "This isn't the kind of gummy you eat on your way home. Then when you're home in an hour it kicks in 30 minutes later. This is the kind of gummy that's going to kick in in 20 or 30 minutes and it's going to kick in much more than you are used to it kicking in because of the particle size of it."

This is where I say, I'm definitely not smart enough to get into it too much but I do know that there is some dosing requirement that should be different and that it changes based on the form just based on understanding how much of that medicine is going to be absorbed into your bloodstream.

Traditional medicine's been doing it for years like a Tylenol is, the particle size is small enough that 80% to 90% of it gets absorbed. Versus right now the cannabis industry is providing people medication where only 30% to 40% of it, let's say, is getting absorbed because the particle sizes aren't small enough to make it into your bloodstream in the same way.

I think that probably goes back into the consumer education piece of it. How do you explain that to somebody that you aren't allowed to communicate with as an operator which is a marketing rule. How do I tell a patient any of this if I can't even tell them anything. It's a big mess, I would say, but every time that we have these conversations. I feel like I'm a little bit more optimistic. Although Tim's up there saying he thinks safe banking is going to pass. I can't necessarily agree with him on that, but I hope he's right.

All right, Mark, does that kind of bring us to the end?

Katherine: If you have any questions or anything, feel free to reach out to us. We're happy to answer anything that you have if you weren't able to get anything in the chat. Thank you very much. Bye guys.