VIDEO: Cannabis Compliance on New Regulations and Dispensary Legitimization

MidasLetter Live

Cannabis Compliance Vice-President Deepak Anand and Director of Strategic Sales Michael Elkin discuss regulatory compliance from cultivation to sale. Cannabis Compliance specializes in cannabis compliance laws both in Canada and internationally. The company represents applicants looking to obtain growing licenses from Health Canada in addition to working with approximately half of the existing 115 LPs in the country looking to expand. They discuss how Canada’s significant supply of cannabis is uniquely suited to meet the growing needs of the international market, especially in Germany, a country unlikely to develop domestic cultivation. Domestically, Cannabis Compliance assists existing illegal dispensaries on the road to legitimization.


James West:   Hey. Welcome back to Midas Letter Live. Bit out of the ordinary today- we’ve got two gentlemen here from Cannabis Compliance, Michael Elkin is the Director of Strategic Sales, and Deepak Anand is the Vice-President. Gentlemen, welcome to the show.

Michael Elkin: Thanks for having us, James.

James West:   Why don’t we start with an overview with you, Deepak: what is it that Cannabis Compliance does, and who are their customers?

Deepak Anand: So we’re a regulatory compliance firm, and we work with licensed producers and applicants that are traditionally gone after cultivation because it’s been a fully vertically integrated model in Canada, it’s been seed to sale, and we’ve worked with hundreds of applicants and licensed producers. We’re now busy on the retail side; we’re assisting sort of companies that are in various provinces that allow private retail to be set up there.

James West:   So then, am I to interpret that, as you guys are experts in the law of cannabis compliance, like in the law and complying with the law for growers, and now retail?

Michael Elkin: Absolutely, and it really spans on a global footprint. The way that I kind of describe it is, you have all these governments around the world that are legalizing some type of framework around the actual plant, so we basically do is work with companies and entrepreneurs, basically have them touch the plant in any form that they want to. So whether it’s cultivation, production, manufacturing, transportation, in Canada or in Germany, CCI basically specializes in that expertise.

Deepak Anand: And what we’re finding, as we do a lot of work around the world, we’re finding various Federal governments come to us and say “How did you do it in Canada?” You know, I’ve had the opportunity of working very closely with our federal government here over the past five years in developing, shaping policy. So we’re taking those best practices and implementing them internationally in Lesotho and Colombia and Jamaica and many other jurisdictions, as they look to legalize.

James West:   Mm-hmm. Lesotho is interesting to me, because it’s like a postage-stamp sized company, yet all these cannabis growers are, like, doing deals, and it’s like – so what is, like, Lesotho is a country within the geographical boundary of South Africa. So how is it that this little country here is doing such amazing big things all over the world?

Deepak Anand: So I had the opportunity of going there just last month, and I met with various ministers in the Cabinet there, and we’re doing that on behalf of a client there. You know, what they have decided is, they’ve got access to a lot of land, a lot of water, and very, very cheap labour. Well, what they’ve decided to do is, you know, we want to get ahead of this game, we want to be able to make sure we’ve got a regulatory structure in place that permits for exports in a significant way. They’re really leveraging that, you know. They’ve taken this early lead on – I kind of compare it to where New Brunswick was on this file three years ago. You know, they got a very early lead on sort of the cannabis file; they handed it to the Economic Development sort of ministry, and Lesotho is doing a very similar thing; they’re getting ahead of this.

James West:   Oh, that’s interesting. So currently in Canada, I’m curious as to, are you cognizant with the number of applicants that are still in process at Health Canada?

Deepak Anand: So last number we got, and I asked for an update just last week, it was about 550 people are currently sort of in the queue, and that’s probably, James, over 650 at this point.

James West:   Really?

Deepak Anand: Yeah, absolutely.

James West:   So these are all people still applying for growing licenses under Health Canada?

Michael Elkin: This is still people who have been in the queue for the last four to five years that are working through the various stages of, you know, security clearance, evidentiary packages, full buildouts. And so we represent about 35 to 40 percent of those active applications.

James West:   Oh, okay.

Michael Elkin: Along with working about 50 to 60 of the 115 LPs right now. So, helping them, you know, Site Bs, oil amendment licenses, you know, new markets, expanding…

Deepak Anand: Genetics, import/exports, I mean, exports is a huge one. We’re doing a lot of work in Europe getting people GMP certification, all of those sorts of things.

James West:   Interesting. So it’s overwhelming to me that they’re still licensing grow-ops in Canada, because it’s like, you know, once it’s all said and done, we’ll have enough pot to keep the world high three times over, by the looks of things.

Deepak Anand: Well, I think that’s in interesting conversation. We keep having this supply and demand sort of conversation, and often people are like, you know, is it a commodity? Are we going to be like Oregon? Is there going to be an over-supply? What I think most people don’t realize is, there is a lot of international demand, and countries are coming online what looks like almost daily. You look at Italy, you look at France recently makes an announcement, UK is certainly proceeding down this route.

Michael Elkin: That German RFP that’s out that’s closing October 22nd, I mean, that’s, they’re looking for importation. There’s going to be no domestic cultivation in Germany, we don’t think, for at least five years. Look how long it’s taken us to get some type of base foundation set up for this? I mean, it’s taken us roughly five years to do that, so I mean, the amount of – and all these countries are looking to Canada, right? They want the Federally regulated program, and they want the quality, and that’s where we fit in.

James West:   Well, we also have sort of the long growing pain from MMAR in 2002, which sort of defined and informed the experience that resulted in MMPR, and then ACMPR, and now the Cannabis Act.

Michael Elkin: And what we’re really seeing now – you know, Deepak’s been in the industry since –

Deepak Anand: Five years.

Michael Elkin: For five years, since they went, same thing with me, it’s almost like a reset, right? The Cannabis Act is resetting these regulations; it’s giving, you know, an opportunity for maybe possible MMAR growers to get into the actual space, and I said this to somebody yesterday: now is when you really see a separation in LPs, in consulting firms, in, you know, extraction companies. Now is when, you know, the separation happens and there’s another push for like another next five years. So it’s really exciting for us.

Deepak Anand: And also, we’ve really only done two things well in this country so far, James: we’ve sort of, you know, we’ve grown cannabis, we’ve been cultivators, and we’ve sold dried product, no oils. That’s not where the buck is going. I mean, you look at US states that have legalized; it’s the edibles, the vapes, the concentrates, the extracts. So clearly there’s room for a number of different players to come in here, and we’re doing a lot of work sort of in the US bringing US companies up.

Michael Elkin: We’ve landed two of the biggest brands from California, so Cura Cannabis, that has the Select Oil Vape Pen, we were the ones that brought them into Canada. That deal that happened a couple of days ago with Kronos, for a 100,000 kilo supply agreement, we were smack dab in the middle of that.

James West:   So they’re bringing –

Michael Elkin:

Michael Elkin: We’re getting them operationally licensed in Canada. They’ve created a Canadian entity, they’re filing for a standard processor license; they will be manufacturing Select Oil Vape Pens in Canada with Kronos supply.

Deepak Anand: And that’s one of 10 large deals that we currently have going on of similar, maybe even greater, values.

James West:   Wow, very interesting. So I should really be on the phone with you guys once a week and be looking for public company opportunities.

Michael Elkin: A hundred percent.

Deepak Anand: Absolutely. And we’re live… [laughter]

James West:   Okay, so in the regulatory landscape, I mean, I’m curious as to the international markets. Are these people like – so Germany has basically adopted the stance that ‘we’re not going to become growers for at least five years.’

Michael Elkin: Correct.

James West:   Is there a time on the horizon where all these countries are going to say ‘you know what? Thanks very much, Canadians, now hit the road, because we’re gonna grab the, seize the economic opportunity for ourselves.’

Michael Elkin: Domestic cultivation sort of thing?

Deepak Anand: So what we’re finding is, obviously, clearly, a lot of demand coming in currently from Canada, and, you know, I see that continuing post them setting up a domestic cultivation plan. Where they are currently is, you know, they don’t have enough product, even post this licensing that they’re going about doing; they’re going to license up to a maximum of 30 companies, probably 10 will get licensed. Their outputs are not going to sort of meet their demand needs. I mean, just to give you an idea, currently, James, it’s, you know, cannabis is retailing for about 25 Euros a gram in that market, and they’re out of stock at that price. So this is going to continue.

And as Mike said, you know, it’s going to take five years for any country to really figure out and get a handle on this, and I think by that time, they’re going to almost look at saying, you know, here’s countries like Lesotho and Colombia and Jamaica that are doing this fairly well; let’s do what we’ve always done, is manufacturing versus growing. I think the growing will be done elsewhere by that time. I don’t think you’re going to see a lot of this growing happening. And that’s, if you look at a lot of the LPs now, they’re moving this IP on growing over to countries like that, which makes a lot of sense.

James West:   Sure. Now one of the other main issues that sort of is something I can’t really wrap my head around is, I look at all the illegal dispensaries in, let’s start with Toronto, of which there’s well over 100, and I walk by two of them every day on my way two and from work, and they’re both like lineups around the corner, cash business, there’s no taxes being paid there, but they are asking for ID. You walk into these stores, they’ve got manufactured product that looks like it came from Shoppers Drug Mart. And Ontario’s stance has been very clear: absolutely no way. But in BC, they’ve been giving out licenses to dispensaries that would never fly in Ontario. So how do you reconcile that under a federal recreational policy that permits participants who comply with the Cannabis Act, but denies access to the market to those who do not comply? I mean, are all these Ontario dispensary operators going to find themselves arrested and shut down?

Deepak Anand: Absolutely. I think if you notice the announcement, you know, the Attorney General clearly said ‘stop’; I mean, that was the key message out of that announcement. The previous Attorney General said the same thing. You know, James, there’s a couple of things going on. There’s a Bill called Bill C-46 that doesn’t deal with the Cannabis Act, the legalization, but it does criminal penalties, and this is at a Federal level.

James West:   The Controlled Substances Act?

Deepak Anand: Yeah. It’s something called C-46, which is basically beyond the Controlled Substances, it’s a police and law enforcement type bill that brings in impaired driving, it brings in penalties for working outside the system, dealing with minors, all of those different things into play. So there’s a Federal bill, and then there’s sort of provincial bills that kind of mirror that. So the key message here is, there’s enforcement is going to step up, and you’re looking at provinces like BC and Ontario that have had dispensaries say, come into the system now, we’ll make sort of a pathway for you to get to the legal space, but comply. And so we find a lot of people coming to us from that market saying “How do we comply?” And there is a pathway; there’s a real opportunity here provided by the Federal government and provincial governments, to get into the game.

So you know, I have a lot of dispensaries saying look, I’m making a lot of revenue, I would have to give that up. On the one side we’re like, listen, you look at the upside, you know, you’re going to do really, really well, because again, back to that comment on dried product and oils: nobody has done this in the market better than you guys, so there’s an option for you to transition into the market and really capture that space.

James West:   Right. So these illegal dispensaries, there is a clear pathway towards legitimizing themselves?

Deepak Anand: Certainly, in provinces like BC and Ontario, absolutely. Alberta, on the other hand, not so much.

James West:   Oh, interesting.

Deepak Anand: But BC and Ontario certainly have that pathway, yes.

James West:   Wow, so you guys are going to be busy beavers for a long time.

Deepak Anand: We are.

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