cannabis law 101 - geniecast...missouri overview amendment 2 passed nov. 6, 2018 mo. constitution...

Cannabis Law 101Sorting Through the Weed(s)

Jeffrey L. Wax & Scott D. Levine

AEGIS Law

Cannabis Industry ExperienceManufacturers & Extractors, Cultivars,

Investors

Scott Levine

Robert Gold

Jeff Wax

Missouri Overview

Amendment 2 Passed Nov. 6, 2018

Mo. Constitution Art. XVI, § 1

Mo. Dept. of Health and Senior Services Rules at 19 CSR 30-95.010 – .110

Certification and Licensing Regime Patients/Caregivers

Physicians

Businesses

Deadlines and Fees

Qualifying Conditions

Cancer

Epilepsy

Glaucoma

Intractable migraines unresponsive to other treatment

“A chronic medical condition that causes severe, persistent pain or persistent muscle spasms”Ex. MS, seizures, Parkinson’s disease,

Tourette’s syndrome

Qualifying Conditions

“Debilitating psychiatric disorders … if

diagnosed by a state licensed psychiatrist”

Ex. PTSD

HIV or AIDS

A “chronic medical condition” normally

treated with addictive medication when

physician determines marijuana could be

effective and safer

Qualifying Conditions

Any terminal illness

“In the professional judgment of a physician, any other chronic, debilitating, or other medical condition”

Ex. hepatitis C, ALS (Lou Gehrig’s disease), inflammatory bowel disease, Crohn’s disease, Huntington’s disease, autism, neuropathies, sickle cell anemia, agitation of Alzheimer’s disease, cachexia, and wasting syndrome

Business Licensing

Cultivation

Infused-Product Manufacturing

Dispensaries

Testing

Transportation

Minimum Licenses

Minimum

Cultivation 60

Manufacturing 86

Dispensaries 192 (24/Cong. Dist.)

Testing No Min. (but Max. 10)

Transportation No Minimum

Pre-Filing Statistics

Minimum Pre-Filed Applications

(as of May 31, 2019)

Cultivation 60 155

Manufacturing 86 82

Dispensaries 192 (24/Cong. Dist.) 289*

Testing No Min. (but Max. 10) N/A

Transportation No Minimum N/A

*All but Districts 6 and 8

exceed 24 applications

Key Considerations

Structure

Location

Experience and Diversity (the Team)

Business Plan

Federal Law Complications

Financing/Raising Investor Funds

Other Topics

Facility Requirements

Applications and Fees

Physicians

Patients and Caregivers

Timeline

Structure

Majority Owner Rule

Licensee entity must be “majority owned

by natural persons who have been citizens

of the state of Missouri for at least one

year prior to” application. Mo. Const. art.

XVI § 1.7(3); 19 CSR 30-95.040(3)(B)

“citizen” = “resident” (Id.)

Structure

Majority Owned “More than fifty (50) percent of the economic

interests and more than fifty (50) percent of the voting interests of an entity, including any parent or subsidiary entities.” 19 CSR 30-95.010(18)

Economic Interest “Rights to either the capital or profit interests

therein, or a combination thereof; or, in the case of a corporation, rights to some portion of all classes of outstanding stock of the corporation.” 19 CSR 30-95.010(10)

Structure

Capitalization Requirements

Choice of Entity

Departmental Approval of Changes

Location

Site Control and Plans

Friendly Municipality

Location

1000 Foot RuleNo facility shall be “sited within one

thousand feet of any then-existing elementary or secondary school, child day-care center, or church.” Mo. Const. art. XVI §1.7(11)

Measured by “shortest path … that can be lawfully travelled by foot.” 19 CSR 30-95.040(4)(B)

Experience and Diversity

Professional Backgrounds

Diversity

Other Team Members

No “disqualifying felony offense”

Business Plan

Experience and Diversity

Capitalization

Financial Plan

Market Analysis

Expected Revenues and Expenses

Marketing Plan

Business Plan

Insurance

Inventory Control

Security and Loss Prevention

Odor Control Plan

Low-Income Qualifying Patients

Employee Recruitment/Training

Federal Law Complications

Schedule I Controlled Substance

ExamplesMarijuana

Heroin

LSD

Peyote

Quaaludes

Ecstasy

Federal Law Complications

Schedule I Controlled Substance

FactorsHigh potential for abuse

No currently accepted medical use in treatment in U.S.

Lack of accepted safety for use under medical supervision

Cannot be prescribed

Federal Law Complications

Schedule I Controlled Substance

Unlawful to “manufacture, distribute, or

dispense” or “possess with intent to

manufacture, distribute, or dispense”

Cole Memorandum

Issued Aug. 29, 2013

Rescinded Jan. 4, 2018

Sidebar – Practice Note

Sample Fee Agreement Language

The Client acknowledges and understands that the cultivation, production, and/or distribution of marijuana or products containing marijuana or other cannabinoids is illegal under Federal law and that the Client is subject to arrest, prosecution, and forfeiture of assets by Federal authorities for engaging in these activities notwithstanding Article XVI of the Missouri Constitution and any statutes or regulations promulgated thereunder.

Federal Law Complications

Internal Revenue Code § 280E No deduction or credit shall be allowed for

any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

Federal Law Complications

Internal Revenue Code § 280E

Pay taxes on $350,000, not $150,000

Example

Gross Income $1,000,000

COGS $650,000

-----------------

Net Income $350,000

Expenses $200,000

-----------------

Profit $150,000

Federal Law Complications

Financial Services

Banking Services Generally

2014 FinCEN/DOJ Memo

What can’t be done?

SAFE Act

Financing/Raising Investor Funds

Stage-Specific Fundraising Needs,

Compliance Strategies, Challenges

Stink by Association

Unique Disclosure Strategies for

Issuers

Recent Cases by SEC and DOJ

Facility Requirements

Generally 19 CSR 30-95.040

Single licenses, consolidation

Facility Agent ID Cards

Inventory Control System

Packaging and Labeling

Free from Contaminants

Waste Disposal

Facility Requirements

Generally 19 CSR 30-95.040

Security Plans and Equipment

Signs and Advertising

Employee Training

Inspections

Facility Requirements

Cultivation 19 CSR 30-95.050

Manufacturing 19 CSR 30-95.060

Dispensaries 19 CSR 30-95.080

Testing 19 CSR 30-95.070

Transportation 19 CSR 30-95.100

Application and Fees

Fees

Application, Annual, Renewal

Minimum Standards

Additional Evaluation Criteria

10 Criteria

Adjustments

Commencement Inspection

Physicians

Not a “prescription”

Certification Requirements

Patient Exam

Qualifying Condition

Discussion of Risks

Written Consent for Minors

Patients and Caregivers

Annual Certification from Physician

Apply for ID Cards

Patient Cultivation

Purchase and Possession Limitations

Miscellaneous

Timeline

June 4, 2019 –Applications Available

July 4, 2019 – Patient/Caregiver Applications Accepted

August 3, 2019 – Licensee Applications Accepted

August 17, 2019 – Licensee Application Window Closes

December 31, 2019 – Deadline to Issue Licenses

Resources

Mo. Department of Health and Senior Services http://medicalmarijuana.mo.gov

Missouri State Medical Association http://www.msma.org/medical-marijuana.html

National Cannabis Industry Association https://thecannabisindustry.org/ncia-news-resources/state-

by-state-policies/

AEGIS Law – 314-454-9100 http://www.aegislaw.com Scott Levine, x101, slevine@aegislaw.com

Robert Gold, x128, rgold@aegislaw.com

Jeff Wax, x124, jwax@aegislaw.com

Thank you!

Questions?