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Cannabis Companies and the OTC Markets

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I stumbled upon this recent post by Jason Paltrowitz titled “Lawful but Awful: The Small Cap IPO Cycle.” It contains some interesting findings and I like everything about it for cannabis companies, except the conclusion. The conclusion is that OTCQX and OTCQB markets are a good alternative to senior U.S. exchanges for small companies. The argument is that OTC markets “offer a simplified path with financial, corporate governance, and disclosure requirements tailored to smaller companies.”

Plant-touching U.S. cannabis companies cannot list on the senior U.S. exchanges, meaning the NYSE or Nasdaq. Still, many U.S. cannabis companies that want to raise significant capital choose to “go public.” The well-worn path is either to: 1) list in Canada or overseas, via reverse merger, or 2) head to the abovementioned OTC markets, again via reverse merger, and pursue a Regulation A offering. However, in my experience, the OTCQX and OTCQB are not good places for cannabis companies.

OTC markets are teed up for fraud

Don’t take my word for it: here’s an SEC bulletin updated earlier this year and another in the specific context of cannabis stocks– going back to 2014. Here too is a FINRA warning, a sample DOJ microcap cannabis prosecution, and an FBI case study. As you might infer, sad stories related to OTC scams abound. This is because the OTC sandbox is a huckster’s paradise, due to the susceptibility of OTC stocks to dramatic price swings and the low level of required disclosures.

Now, one could argue that none of this is necessarily bad for OTC cannabis companies: instead, it’s bad for the people who invest in them. That’s not exactly right. An OTC cannabis company, along with its management, has fiduciary and governance-related obligations to investors. Public companies are no different than private firms in that respect. In all, the level of exposure for a cannabis company grows commensurate to the amount of capital it raises, as well as how it goes about the raise.

OTC market deals are weird

I have been in and around a sizable number of OTC cannabis company listings at this point. They’re weird. In many cases, a cannabis company will be approached by an M&A advisor and/or investment banker affiliated with an OTC company. These individuals may propose a reverse merger, whereby the cannabis company delivers all of its shares (sometimes through a newly created entity) to the OTC shell, in exchange for shares in that shell. At closing, the cannabis company owners receive some combination of common and preferred shares, and maybe even warrants, in the OTC company.

In many cases, cursory diligence on the OTC company throws off obvious red flags. I’ve seen proposals where the shares offered to the uplisting owners exceed the issuable securities shown for the OTC firm. I’ve seen many OTC company shells with EDGAR information severely at odds with private disclosures. Some of these matters are deferred maintenance, to be addressed with counsel in service of a proposed transaction. Others are landmines and may be intractable.

More discomfiting than any of this, however, is the common situation where an OTC promoter approaches a cannabis business with no idea – or interest, apparently – in whether the cannabis company is even viable. The promoter will want to agree to binding terms having done no diligence on the target. Friends, if the most considered aspect of a proposed deal is the warrants a promoter gets on signing, you’re probably looking at a pump-and-dump scheme.

You may lose control on the OTC market, gaining only headaches

In an OTC listing the cannabis company “trades up” for an opportunity to be listed on a public exchange and to raise money through that vehicle. Ownership must weigh the probability of successful fundraising against the control yielded to other parties. Those parties may include legacy preferred shareholders, in addition to newly appointed directors and officers, and promoters bringing the deal.

Sometimes (not always), yielding control is required for cannabis company growth. Assuming obstacles like residency requirements are navigable in the new structure, it’s important for the uplisting owners to consider what it would mean to own a smaller piece of a potentially larger pie. This is not just a question of economics, but also decision-making. If the owners lose the ability to direct the company in any sense beyond daily operations, they may determine the prospect of additional capital isn’t so attractive.

This may feel frustratingly obvious after the closing of an uplist transaction. A standard scenario sees the OTC stock spike, dive and inevitably flatline. At that point, uplisting owners will be left wondering why they went to all the trouble. If you lose control of your company only to make some money for stock promoters, then you’ve really lost.



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Wait, Can TSA Now Stop You for Cannabis in Your Luggage?

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Can TSA stop you if you have weed in your bag?

With the election over and Republicans getting a clean sweep across much of the board in America, is it safe to travel on an airplane with weed, now? Traveling with cannabis can be a daunting experience, especially given the complex web of state and federal laws governing its use and possession. As more states legalize marijuana for recreational and medicinal purposes, many travelers find themselves asking: **Can the Transportation Security Administration (TSA) stop you for cannabis in your luggage?** This comprehensive guide will explore TSA policies regarding cannabis, the implications of federal law, and practical advice for travelers to navigate this evolving landscape.

 

The Legal Landscape of Cannabis in the United States

 

 Federal Law

 

At the federal level, cannabis is classified as a Schedule I substance under the Controlled Substances Act. This classification indicates that marijuana is considered to have a high potential for abuse and no accepted medical use. Consequently, possession, distribution, or cultivation of marijuana remains illegal across the United States, regardless of state laws.

 

In December 2018, the U.S. Congress passed the **Farm Bill**, which legalized hemp-derived products containing less than 0.3% THC (the psychoactive component of cannabis). This legislation opened the door for the legal sale and transportation of certain hemp-derived products, such as CBD oil. However, it did not change the legal status of marijuana itself.

 

State Laws

 

In contrast to federal law, many states have enacted their own laws regarding cannabis use. As of now, over 30 states have legalized marijuana for medical use, and several have also legalized it for recreational use. Each state has its own regulations governing possession limits, usage locations, and age restrictions. Here are some key points to consider:

 

  • Recreational Use: States like California, Colorado, and Oregon allow adults over 21 to possess and use cannabis legally.

  • Medical Use: Many states require patients to obtain a medical marijuana card to access cannabis products legally.

  • Decriminalization: Some states have decriminalized possession of small amounts of cannabis, meaning that while it remains illegal, penalties are reduced.

 

The Patchwork of State Laws

 

The disparity between state and federal laws creates a patchwork legal environment that can be confusing for travelers. For instance:

 

  • A traveler may legally purchase cannabis in California but face legal repercussions if they attempt to bring it into a state where it remains illegal.

  • Even in states where cannabis is legal, local jurisdictions may impose additional restrictions or penalties.

 

TSA Policies Regarding Cannabis

 

TSA’s Primary Mission

 

The primary mission of the TSA is to ensure the safety and security of air travel. Their focus is on preventing dangerous items from being brought onto airplanes—such as weapons or explosives—rather than enforcing drug laws. This means that while TSA officers may encounter cannabis during security screenings, they are not actively searching for it.

 

 What Happens If TSA Finds Cannabis?

If TSA officers discover cannabis during a security screening, they follow specific protocols:

 

1. Confiscation: The TSA will typically confiscate any cannabis products found in your luggage.

2. Notification of Law Enforcement: TSA officers may notify local law enforcement if they find marijuana in your luggage. What happens next depends on local laws regarding cannabis possession.

 

The Role of Local Law Enforcement

When local law enforcement gets involved after TSA confiscates cannabis:

 

  • Legal Consequences: Depending on the amount found and local laws, you may face fines or other penalties.

  • Discretionary Enforcement: In some areas where cannabis is legal or decriminalized, law enforcement may choose not to pursue charges against individuals found with small amounts.

 

 What You Can Bring: Understanding Limits

 

Under the 2018 Farm Bill, hemp-derived products containing less than 0.3% THC are legal federally. This means that items such as CBD oil made from hemp can be transported legally through airports. However, it’s essential to carry documentation proving that the product contains less than 0.3% THC to avoid issues at security checkpoints.

 

Tips for Traveling with Hemp-Derived Products

 

1. Documentation: Always carry a certificate of analysis (COA) from a reputable lab showing that your product meets federal guidelines.

2. Proper Packaging: Keep hemp-derived products in their original packaging to avoid any confusion during security checks.

3. Know Your Product: Be aware of the THC content in your product; if it exceeds 0.3%, it could be considered illegal under federal law.

 

 Medical Marijuana

If you are traveling with medical marijuana, understanding both your departure and arrival states’ laws is crucial:

 

1. Check Local Laws: Some states allow medical marijuana patients to carry their medication across state lines; others do not.

2. Documentation: Always carry your medical marijuana card and any prescriptions to avoid complications at security checkpoints.

 

 Considerations for Medical Marijuana Users

 

  • Quantity Limits: Be aware of how much medical marijuana you are allowed to carry according to your home state’s regulations.

  • State Reciprocity: Some states recognize out-of-state medical marijuana cards; check if your destination state has this provision.

  • Traveling by Air: If flying from a legal state to another legal state but through a non-legal state, consider alternative routes or transportation methods.

 

Navigating Airports with Cannabis

 

Security Screening Procedures

When you arrive at an airport with cannabis or hemp-derived products:

1. Prepare for Screening: Place all items in your carry-on bag for easier inspection.

2. Be Honest: If questioned by TSA officers about any items in your bag, be honest about what you’re carrying.

3. Stay Calm: If TSA finds cannabis during screening, remain calm and cooperative; panicking can escalate the situation unnecessarily.

 

 Airport Policies on Cannabis

 

While TSA is responsible for security screenings, individual airports may have their own policies regarding cannabis:

  • Some airports in legal states have designated areas where travelers can consume cannabis legally before boarding their flights.

  • Other airports may have strict policies against any form of cannabis possession due to local laws.

 

Tips for Travelers

To ensure a smooth travel experience when it comes to cannabis, consider these tips:

 

 

1. Know Your Destination’s Laws: Research both your departure and arrival locations’ laws regarding cannabis possession and use.

2. Local Regulations: Understand any local regulations that may differ from state laws; some cities have stricter rules than their respective states.

 

If possible, refrain from bringing cannabis on your travels altogether:

 

  • Purchase it legally at your destination if allowed.

  • Consider using delivery services available in some legal states that can bring products directly to your accommodation.

 

 

If you must travel with cannabis or hemp-derived products:

 

1. Keep It Discreetly Packed: Store products discreetly within your luggage to avoid drawing attention during screenings.

2. Stay Within Legal Limits: Adhere strictly to possession limits set by both your home state and destination state.

 

 Understand Risks Involved

 

Be aware that even if you are traveling from a legal state to another legal state:

 

1. Federal Law Applies in Airports: Federal law governs airports; possessing marijuana can lead to serious consequences regardless of state legality.

2. Potential Legal Issues: Be prepared for potential legal issues if stopped by law enforcement.

 

 Real-Life Scenarios and Experiences

 

Understanding how TSA policies play out in real-life scenarios can provide valuable insights for travelers:

 

Scenario 1: Traveling from California to Colorado

 

A traveler leaves California (a legal state) with an ounce of recreational marijuana intended for personal use while visiting Colorado (another legal state). At LAX airport security.

The traveler places their bag on the conveyor belt without any concern since both states allow recreational use. TSA discovers the marijuana during screening; they confiscate it but do not involve law enforcement due to California’s legalization status.

In this case, although both states allow recreational use, the traveler faced no penalties because they were compliant with California’s regulations when departing.

 

 Scenario 2: Traveling from New York to Texas

 

A medical marijuana patient travels from New York (where medical use is permitted) to Texas (where possession remains illegal). The patient carries their prescribed quantity along with documentation  Upon arriving at an airport in Texas, TSA discovers the medical marijuana during screening. Local authorities are notified due to Texas’s strict laws against possession; the traveler faces potential charges despite having valid documentation from New York.

This scenario illustrates how traveling between states with differing laws can lead to serious consequences despite having valid medical documentation.

 

Conclusion

 TSA does not actively seek out cannabis during security screenings, they will confiscate any found and may report it to local authorities. The legality of traveling with cannabis depends heavily on state laws and federal regulations making it essential for travelers to stay informed about both sets of rules before embarking on their journey.

By understanding these guidelines and taking proactive steps such as researching destination laws and considering alternative options travelers can navigate their travel plans confidently and minimize risks associated with carrying cannabis through airports. As societal attitudes toward cannabis continue to evolve alongside changing legislation across various jurisdictions, staying informed will remain crucial for anyone looking to travel with this increasingly popular substance safely and legally.

 

TSA ALLOWES CANNABIS-BASED MEDICINES NOW? READ ON…

TSA AND CANNABIS-BASED MEDICINES

CANNABIS BASED MEDICINES ALLOWED ON PLANES NOW!



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Why Weed is the Best Thing That’s Happened to Endometrosis Patients in the Last 50 Years

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Endometriosis is one of the most pain conditions affecting women worldwide.

When endometriosis occurs, the endometrial tissue which normally grows inside the uterus, grows outside of it. As a result, it can attach itself to other reproductive organs in the area. In extreme cases, endometriosis can reach far beyond the reproductive area and cause serious pain and damage. The symptoms of endometriosis include sharp period pains, fatigue, pain during sex, infertility, heavy periods, and much more.

 

According to the World Health Organization, around 10% of women who are in reproductive age, have endometriosis. Unfortunately, there is no known cure, though several protocols can be integrated into a patient’s lifestyle to mitigate or reduce symptoms. Some common medications used for reducing the symptoms of endometriosis include birth control pills, hormonal injections, patches, and intra-uterine devices (IUD), to name a few. However, these may affect a woman’s chances of getting pregnant, or make infertility even worse since endometriosis can also affect fertility.


Thankfully, more women are finding success with lifestyle changes and integrating natural treatments to treat endometriosis. Along with regular exercise, weight loss among overweight women, and healthy habits, cannabis has been shown to be helpful treating this dreaded disease.


What Studies Are Saying

 

There are more studies than ever, too, proving the efficacy and benefits of cannabis for women suffering from endometriosis. In a recent study out of Germany, researchers analyzed survey data from more than 900 endometriosis patients to determine how, if any, the symptoms are impacted by cannabis.


A significant percentage of the 900 respondents acknowledged using marijuana, and most of them said that it was beneficial in helping with symptoms. “Seventeen percent of the respondents used cannabis flower strains or cannabis-related products as a self-management method,” said the researchers. “Cannabis was rated as the most effective self-management strategy to reduce symptom intensity (self-rated efficacy 7.6 out of 10). Additionally, ~90 percent of the participants were able to decrease the pain medication intake,” explained the researchers. They also noted that the participants observed the most significant benefits from cannabis in their sleep, menstrual pain, and non-cyclic pain in that order. Because of this, it’s become clear that cannabis can greatly help improve quality of life in these areas, which are otherwise affected by symptoms of endometriosis.  

 

It’s important to note that the investigators also acknowledge that existing studies on cannabis for endometriosis is limited, yet there is an increasing quantity of studies pointing to a growing trend of women self-medicating with cannabis for this condition, and seeing success!


“The use of cannabis has a significant impact on the overall well-being and quality of life of women with endometriosis,” they concluded. “The study indicates that there is a significant interest and demand for additional therapeutic options, and cannabis can potentially become an important part of a multimodal therapy approach for treating endometriosis,” said the study.

 

Another study from Australia, whose results were published earlier this year, found similar results. The data, which was published in the journal, Obstetrics and Gynecology, were taken from 192 women who were polled by Australian researchers regarding their history of marijuana consumption and endometriosis symptoms.

 

According to the findings, 63% of the poll respondents were given doctor’s authorization letters for using cannabis-based medications. In Australia, physicians are legally allowed to recommend cannabis use for patients who have had no luck treating specific conditions using conventional prescription drugs. In the study, most women were using THC-dominant marijuana products and they reported improvements when it came to sleep, pain, nausea, and anxiety.


“This study found that THC-predominant CBMPs [cannabis-based medicinal products] are commonly prescribed to Australians with endometriosis,” said the authors. “Given major issues with symptom management and the self-reported reductions in pain and other symptoms, improving access to medicinal cannabis for this population is important and timely,” they said.

 

Why Cannabis Works So Well For Endometriosis


These studies and tons of anecdotal evidence available on the internet show that cannabis is indeed safe and effective for treating endometriosis. After all, cannabis interacts with the endocannabinoid system (ECS), which plays an important role in helping us regulate pain, inflammation, and our immune response – all of which are impacted by endometriosis.

 

While there are many symptoms that cannabis can help with, one of its greatest successes has been in reducing pain. Women have found success using both high-CBD and high-THC products to reduce the severe pain that accompanies endometriosis. Likewise, the pain, discomfort, and cramping can make it difficult to get some decent sleep; marijuana can help with that too!

 

In addition, marijuana can help women’s bodies balance out hormones, since the endocannabinoid system also plays a role in hormone regulation.

 

Furthermore, women can choose from a variety of products to help treat endometriosis. While smoking or vaping is always a popular choice, there ae also edibles, topical creams, oils, beverages, and tinctures.

 

Conclusion


When looking to treat endometriosis, remember that there is no miracle cure out there. Marijuana certainly helps, but it’s not a one-size fits-all approach. Please remember to consult with a medical professional, and keep in mind that you will always have the best results if you also address other lifestyle factors as mentioned earlier.

Maintaining a healthy weight, avoiding processed and sugary food, and regular exercise are all key factors to mitigating the symptoms of endometriosis. Add cannabis to the mix, and you can now look forward to regaining a better quality of life.

 

MARIJUANA STRAINS FOR ENDO PATIENTS, READ ON…

STRAINS FOR ENDOMETRIOSIS

CANNABIS STRAINS FOR ENDOMETRIOSIS PATIENTS TO TRY FIRST!



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Amendment 3: Florida Legalization Fails

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Amendment 3, which would have legalized recreational marijuana for adults in Florida, garnered 55.8% of the vote, falling short of the 60% threshold needed to pass. While the initiative had the support of President-elect Trump, the opposing forces led by Florida Governor Ron DeSantis carried the day. Supporters may draw some comfort from the fact that a clear majority of voters supported legalization, but the fact remains that adult-use cannabis will remain illegal in the Sunshine State for the foreseeable future.

Leaving aside the fact that getting 60% of voters to agree on anything these days appears to be a tall order, Amendment 3 faced active opposition from Florida’s leadership. While themselves driven by a fundamental dislike of cannabis, Gov. DeSantis and his team deftly tapped into concerns that came from different places altogether, such as the lack of provisions for home grow and related concerns over the entrenchment of “Big Weed”.

Looking at the big picture, it is remarkable to see how much Floridians’ attitudes toward cannabis have changed in the past decade. Back in 2014, it was a medical cannabis initiative that fell short of the 60% supermajority requirement. Ten years on, a legal medical marijuana industry is well established in Florida.

Despite the progress, the experience with Amendment 3 suggests that further reliance on the initiative process is not the path forward for legalization advocates. Just getting the proposed amendment on the ballot required overcoming legal challenges from the state government, before addressing the challenge of seeking 60% of votes in the nation’s third-most populated state.

A more sensible approach might be to focus on the fact that legalization is already supported by a majority of Florida voters. For elected officials in large swathes of the state, support for legalization could be a boon. And the fact that concerns over Big Weed control helped defeat opposition to Amendment 3 presents a political opportunity, not for those who double-down on prohibition, but for those who refine approaches to legalization.

We’ll discuss the Florida result on Thursday in a free webinar (register here), along with the disappointing results in North Dakota and South Dakota, the win (for now) in Nebraska, and a few other state and local measures on cannabis regulation. Hope to see you soon.



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