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tekMountain Seminar

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Medicine Man Technologies presentation to tekMountain on May 26th.

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tekMountain Seminar

  1. 1. tekMountain Cannabis Turn Key Solu4ons May 26, 2017 – Wilmington, NC
  2. 2. Medicine Man Technologies We are a cannabis consultancy and brand warehouse who licenses the turn-key cul5va5on and dispensary opera5ng solu5ons established by Medicine Man and Three-A-Light. We are a transparent, public company on the OTC Markets, Symbol: MDCL.
  3. 3. Medicine Man Technologies We have an IP agreement with Medicine Man Produc5on Corpora5on. We have two wholly owned subsidiaries; Three-A-Light and Success Nutrients
  4. 4. Three A Light Three A Light is the premier step-by-step book on indoor cannabis cul5va5on, focused on how to grow 3 pounds of dried, cured flower per 1000W ligh5ng fixture.
  5. 5. Success Nutrients Success Nutrients is a nine-part nutrient line built specifically for cannabis cul5va5on.
  6. 6. Medicine Man Produc4on Corpora4on Medicine Man was founded in 2009 with the goal of producing high-quality, low-cost medical marijuana sold with great customer service to Colorado pa5ents. Today the company operates an industrial cul5va5on facility, which grew 6,900 lbs. of marijuana in 2016, while supplying medical and adult use marijuana to its dispensaries in Denver, Aurora, and Thornton, CO.
  7. 7. State of the Industry
  8. 8. More than ½ of the US has either MED or REC
  9. 9. States that passed new ini4a4ves in November • Medical • Arkansas • Florida • Montana • North Dakota • Adult Use / Recrea5onal • California • Maine • MassachuseYs • Nevada
  10. 10. State of the North Carolina Cannabis Industry • HB 185 • Introduced in late February by Representa5ve Kelly Alexander, a Democrat • “North Carolina Medical Cannabis Act” would establish a comprehensive program • Would allow pa5ents suffering from a variety of condi5ons, including cancer, severe pain and Crohn’s disease, to have access to cannabis medicine with a doctor’s recommenda5on • North Carolina’s program would force pa5ents to have a “bona fide” rela5onship with a state-licensed physician before par5cipa5ng
  11. 11. State of the South Carolina Cannabis Industry • S212 / HB 3521 • “South Carolina Compassionate Care Act” • Gained momentum but the legisla5ve session has recessed for the year. Bills will pick up where they led off when legislature reconvenes in January 2018 • Pa5ents must have a qualifying medical condi5on, their doctor’s recommenda5on and a registra5on card issued by the S.C. Department of Health and Environmental Control • Limits: A pa5ent could not possess more than two ounces of dried cannabis per pa5ent in a 14-day period
  12. 12. State of the Tennessee Cannabis Industry • HB0495 • Tennessee lawmakers heard tes5mony on medical marijuana this session, however lawmakers’ adjourned with issues surrounding medical marijuana unresolved. • Many of the bills brought up this year can be brought back in January when lawmakers return, since 2017 was the first part of a two-year session. • House sponsor: Bill was being taken off no5ce for the current legisla5ve session and a task force would be established by legisla5ve leaders House Speaker Beth Harwell and Lt. Gov. Randy McNally to discuss the issue this summer.
  13. 13. State of the Virginia Cannabis Industry • SB 1027 • Cannabidiol oil and THC-A oil; permiing of pharmaceu5cal processors to manufacture and provide • Authorizes a pharmaceu5cal processor, ader obtaining a permit from the Board of Pharmacy (the Board) and under the supervision of a licensed pharmacist, to manufacture and provide cannabidiol oil and THC-A oil to be used for the treatment of intractable epilepsy. • The bill sets limits on the number of permits that the Board may issue and requires that the Board adopt regula5ons establishing health, safety, and security requirements for permiYed processors.
  14. 14. State of the West Virginia Cannabis Industry •  SB 386 •  Passed by the Legislature April 6 making West Virginia the 29th state to adopt an effec5ve medical marijuana law. No flower allowed •  Beginning no sooner than July 2019, qualifying pa5ents whose doctors have issued them a wriYen cer5fica5on for medical cannabis will be allowed to register with the health department to use medical cannabis and to buy it from regulated dispensaries. •  Qualified Medical Condi5ons: terminal illness, cancer, HIV/AIDS, ALS, Parkinson’s disease, mul5ple sclerosis, spinal cord damage, epilepsy, neuropathies, Hun5ngton’s disease, Crohn’s disease, post-trauma5c stress disorder, intractable seizures, sickle cell anemia, or “severe chronic or intractable pain in which conven5onal therapeu5c interven5on and opiate therapy is contraindicated or has proved ineffec5ve as determined as part of con5nuing care.”
  15. 15. QA Session / Break
  16. 16. Industry Trends MED = Medical Marijuana REC = Recrea4onal / Adult Use Marijuana
  17. 17. Industry Trends •  29 States now have programs with legisla5ve ac5on increasing •  Flower is s5ll #1, but oils, concentrates, and edibles are on the rise •  Pricing commodi5za5on is underway in legal markets •  Research opportuni5es are opening up at the state level (PA, OH) •  Pes5cide management and associated regula5on is evolving quickly
  18. 18. Source: Marijuana Enforcement Division December ‘16 MED Demographics (Colorado)
  19. 19. Source: Headset Cannabis Intelligence July ‘16 REC Demographics (Na4onal)
  20. 20. Source: Headset Cannabis Intelligence July ‘16 REC Demographics (Na4onal)
  21. 21. Source: Headset Cannabis Intelligence July ‘16 Consumer Spending (Per Trip) •  Medicine Man Avg. MED Receipt: $102.46 •  Medicine Man Avg. REC Receipt: $89.22 (Denver) $61.86 (Aurora)
  22. 22. Source: Headset Cannabis Intelligence July ‘16 REC Consumer Spending (Annual)
  23. 23. Recrea4onal Product Category Trends (Na4onal) Source: Headset Cannabis Intelligence July ‘16
  24. 24. Colorado Year Over Year Product Sales
  25. 25. Colorado YOY MED / REC Sales Source: The Cannabist
  26. 26. Industry Opportuni4es
  27. 27. Business Types •  Cul5va5on •  Processing / Extrac5ons (oils, edibles, concentrates) •  Dispensary (medical or recrea5onal) •  Tes5ng •  Security •  Supply Chain (consumables, nutrients, packaging) •  Professional Services (legal, tax, consul5ng, contrac5ng, seed to sale) •  Public / State Services (lobbying, legisla5ve, advisory) •  Investor Opportunity (ArcView or similar)
  28. 28. Cul4va4on Pros Cons ü  Highest Revenue Poten5al ü  Highest Startup Cost ü  Employment / Job Crea5on ü  Highest Overhead ü  Local Capital Investment ü  Rigorous Compliance ü  Limited State Licenses ü  Ill-defined Marketplace ü  Precursor to Adult Use ü  Federal Challenges
  29. 29. Processing / Extrac4ons Pros Cons ü  High Product Margins ü  High Equipment Cost ü  Increasing Market Share ü  Variable Employment Costs ü  Lower Startup Costs ü  Rapid Regulatory Changes ü  Robust Product Lines ü  Source Material Consistency ü  Alterna5ve to Smoking ü  Poor Public Educa5on
  30. 30. Dispensary Pros Cons ü  Direct Pa5ent Care ü  High Security/Cash Handling ü  Employment / Job Crea5on ü  Higher Staff Turnover ü  Lower Overhead ü  Higher Compe55on ü  Safe, Legal Alterna5ve ü  Third Party Dependency ü  Precursor to Adult Use ü  Tax Burden: IRS Code 280E
  31. 31. Ver4cal Integra4on Pros Cons ü  Opera5onal Efficiency ü  Aggregate Startup Cost ü  280E Tax Offset ü  Mul5ple Licenses/Compliance ü  Total Supply Chain Control ü  Real Estate Management ü  Maximized Profit Margins ü  Risk Management ü  Cross-Training Capabili5es ü  Internal Communica5on
  32. 32. QA Session
  33. 33. Cul4va4on 101
  34. 34. Virtual Tour Medicine Man - Cul5va5on Virtual Tour
  35. 35. Plant Basics •  Cannabis Sa5va, Cannabis Indica, Hybrid •  Female plants produce flowers, male plants produce pollen sacks •  If a male plant pollenates a female, she will produce seeds •  Marijuana plants are finicky – they prefer controlled environments •  Gene5cs can vary greatly and influence yield, potency, taste & aroma
  36. 36. Plant Basics
  37. 37. MOTHERS
  38. 38. CLONE
  39. 39. EARLY VEG
  40. 40. MID – LATE VEG
  41. 41. EARLY FLOWER
  42. 42. LATE FLOWER
  43. 43. TRIM
  44. 44. DRY
  45. 45. CURE
  46. 46. THREE A LIGHT
  47. 47. Inventory Control / Seed to Sale Tracking •  Most states require strict seed to sale tracking •  Tracks all physical plant inventory throughout the plant lifecycle •  Includes plant status, plant weights (wet, dry, waste), destruc5on •  Typically must interface with State system
  48. 48. Cul4va4on Facility Type There is no wrong way to grow: •  Warehouse / Hardened Indoor Structure •  Greenhouse / Shade house •  Hybrid (Greenhouse + Warehouse) •  Outdoor
  49. 49. QA Session
  50. 50. Processing / Extrac4on 101
  51. 51. Extrac4on Methodology •  Popular methods include hydrocarbon (butane), ethanol, or CO2 •  State and local laws may dictate which methodology is permiYed, be sure to remain compliant and able to adjust to changing legisla5on •  Will influence facility design and equipment costs •  All have pros & cons – there are experts available in each field
  52. 52. Extrac4ons •  Highly concentrated marijuana extract which can yield high THC/ CBD percentages. Product Types include: Oil (BHO – Butane Hash Oil, CO2 Oil), Wax (Budder, Crumble), ShaYer, Live Resin, Bubble Hash, Kief.
  53. 53. Infused Product Categories •  Edibles (sweets, savories) •  Beverages (soda, tea, juice, concentrated shots) •  Sublingual 5nctures, sprays •  Capsules, pills, lozenges •  Topicals (patches, salves, lo5ons, rubs)
  54. 54. Infused Product Packaging
  55. 55. Don’t Do This…
  56. 56. QA Session
  57. 57. Dispensary 101
  58. 58. Virtual Tour Medicine Man - Dispensary Virtual Tour
  59. 59. IRS Tax Code 280E •  Prohibits marijuana businesses from deduc5ng their ordinary business expenses because marijuana is classified as a Schedule 1 •  280E enables the Federal Government to collect taxes of gross sales because it does not differen5ate between income derived from legal sources or illegal sources •  More expenses can be deducted from the cul5va5on side than the dispensary side, which the laYer ends up in the highest tax bracket
  60. 60. Customer Service •  Like any retail business, great customer service is paramount •  Transac5on can take over 15 minutes per pa5ent, especially first 5mers who need more product educa5on •  Customers build rela5onships with budtenders, as a result budtenders can heavily influence a retail sale and ongoing dispensary sales •  Online reviews are increasingly popular – respond in a 5mely manner •  Consider a pa5ent loyalty or rewards program for consumers
  61. 61. QA Session
  62. 62. Security 101
  63. 63. Security Systems All security elements are focused on preven5ng diversion and providing for pa5ent and employee safety. Marijuana facili5es are typically required to have the following systems in place: •  Video monitoring requirements •  Alarm systems, panic buYons •  Locks, key-cards, biometrics •  Off-site record keeping
  64. 64. Physical Security •  Pa5ent, guest, visitor check-in sta5on •  Roaming security •  Lethal/non-lethal considera5on •  Third-party/in-house considera5on
  65. 65. Product and Cash Vaul4ng •  High-value finished products typically require vaul5ng, including environmental controls (climate, refrigera5on, etc.) •  Typically an interior room, hardened construc5on, restricted access •  May require independent security monitoring
  66. 66. Cash Handling •  Medicine Man owns and operates their own on-site ATMs •  Cash is vaulted within an on-site secure loca5on and has restricted access •  Medicine Man u5lizes a third-party provider, Blueline Protec5on Group, to transport cash from the facili5es on a regular basis •  Blueline is licensed to work directly with the Federal Reserve to deposit cash upon no5fying our financial ins5tu5on of the transac5on, mi5ga5ng the risk associated with off-premise employee cash handling
  67. 67. Transporta4on and Chain of Custody •  Transporta5on of finished goods between licensed facili5es requires a transporta5on manifest which documents chain of custody •  State agencies can typically track and monitor this independently, ensuring that diversion is not taking place •  Some states require GPS monitoring and provide specifica5ons for transporta5on agents and vehicles to ensure integrity of the process
  68. 68. QA Session / Break
  69. 69. Cannabis Business Planning Basics
  70. 70. Business Plan Fundamentals A well-founded business plan should be your group’s first order of business •  Get started early and tell your story •  Financial capabili5es and accountability are cri5cal •  Define opera5ng outlook and partners or consultants •  Product, Public, and Pa5ent safety are always paramount
  71. 71. Management Team / Advisors •  Consider Past Business Experience, Financial Capabili5es •  Cul5va5on: Agriculture (Hor5culture, Botany, Nursery, Farming) •  Retail: Medical (Pharm-D, Nurses, Physicians) •  Advisory Board (Cannabis Experts, Legal, etc.)
  72. 72. Market Assump4ons •  Determine current size and growth poten5al - u5lize historical data from other states but have the crystal ball ready •  Pa5ent qualifying condi5ons list is key •  Physician/pa5ent rela5onship & recommenda5on vs. prescrip5on is key •  Product mix list is key - Flower, Oils, Edibles
  73. 73. MED Pa4ent Condi4ons (Mul4-State)
  74. 74. MED Pa4ent Condi4ons (Colorado) Source: Marijuana Enforcement Division December ‘16
  75. 75. Pro Forma Setup •  Pre-Applica5on (Business Plan, Legal, Consultants, Travel) •  Applica5on (Technical Wri5ng, Prepara5on, Filing) •  Execu5on (Architectural, Construc5on, MEPs, Permiing) •  Pre-Opening (Hiring, Training, Consumables) •  Opera5onal (Staffing, Energy, Insurance, Con5ngencies) Sample Pro Forma
  76. 76. Financial Plan Elements •  Pre-Applica5on Expenses •  Applica5on Management and Filing Expenses •  Interim Applica5on Processing Expenses •  Post-Applica5on Capital Deployment •  Opera5ons Outlook & Staffing •  Burn Rate •  Con5ngencies •  Investors and Investor Preferences
  77. 77. Site Selec4on •  Proximity & local law (schools, churches, etc.) •  Loca5on: metro / rural and the transporta5on delta •  Ease of zoning and permiing •  Community buy-in •  Security and proximity to local law enforcement
  78. 78. Cul4va4on/Processing Facili4es Considera4on •  Loca5on •  Lease vs Own •  Tenant Improvements •  Power Demand •  Security
  79. 79. Retail Dispensary Facili4es Considera4on •  Accessibility •  Privacy •  Elegant security •  Finish preferences •  Environment
  80. 80. Banking Tips •  Its all about local rela5onships •  Be honest and declare your nature of business (retail) •  Bank under a non-cannabis related name •  Private Colorado banks are not taking out of state business •  Its easy to open accounts with big banks, but they inevitably come around to the nature of your business and close accounts – be prepared
  81. 81. QA Session
  82. 82. License Applica4on Planning
  83. 83. Keys To A Successful Applica4on 1.  A well-craded story explaining the applicant’s suitability 2.  Technical wri5ng (legal or individuals with DOH RFP experience) 3.  Ownership team and industry consultants 4.  Control of real estate for cul5va5on/processing & dispensary 5.  Adequate funding and opera5onal capital 6.  Strong community and poli5cal support
  84. 84. Pre-Applica4on Planning •  Review your State rules and dates – stay ahead of the curve and par5cipate •  Retain competent consultants and advisors •  Preliminary work: •  Determine financial capabili5es and flush out a well-founded pro forma •  Background checks (don’t let this come back to haunt you) •  Begin reviewing real estate opportuni5es •  Engage your community officials •  Engage local zoning officials •  Engage local law enforcement
  85. 85. Resource / Consul4ng Planning •  Cul5va5on (Bou5que vs Commercial/Industrial) •  Processing & Manufacturing (Extrac5ons) •  Dispensary •  Security •  Seed To Sale Tracking / Inventory Control •  Lab Tes5ng •  Legal •  Technical Wri5ng •  Project Management
  86. 86. Applica4on Influencers (External) •  State Legisla5on •  Poli5cal Influence & Lobbying •  Real Estate & Zoning Requirements •  Public Hearings •  State Applica5on Process and Format
  87. 87. Applica4on Plan Elements •  Cul5va5on SOP, Processing SOP, Retail SOP – how will these be established in a 5mely manner and who will be responsible? •  Consider sample plans for the following elements: •  Gene5cs, Post-Harvest, Batch Processing, Finished Goods Management, Packaging, Quality Control, Waste Destruc5on, Security, Transporta5on, Pa5ent/Product Educa5on, Community Impact & Outreach, Staffing/HR/ Employment, Facility Management, Compliance, Inventory Control, Tes5ng, Product Alerts/Recalls
  88. 88. Applica4on Submical and Outlook •  Timelines can vary widely (Maryland experience) •  Be prepared for the wai5ng game •  Management of real estate deals can be cumbersome •  Interim prep work, be prepared for both scenarios
  89. 89. Post-Applica4on Outlook •  Follow state 5melines and fee schedules •  Construc5on management •  Hiring and training •  Permiing and inspec5ons •  Applica5on accountability and deployment
  90. 90. Medicine Man Technologies App Experience •  Colorado •  Illinois •  Nevada •  New York •  Maryland •  Hawaii •  Puerto Rico •  Pennsylvania •  Upcoming: Ohio, Arkansas, Michigan, California
  91. 91. QA Session
  92. 92. Local Outreach and Advocacy
  93. 93. Local Outreach & Community Support •  People do businesses with people they know, like, and trust •  At the local, state, and federal level its important to develop and maintain good rela5onships with policy makers and policy enforcers •  Many communi5es are unprepared for cannabis business; developing community impact and outreach plans in concert with local officials can mi5gate their fears and beYer prepare them for the future
  94. 94. Industry Advocacy and Involvement •  Five reasons to get involved in a cannabis-related trade associa5on: 1.  Networking 2.  Educa5on 3.  Compe55ve edge 4.  Access to industry experts 5.  Advocacy for the cause
  95. 95. Medicine Man Technologies Licensing & Consul4ng
  96. 96. Licensing & Consul4ng Services •  Cul5va5on Licensing •  Financial Modeling, Real Estate Sufficiency, Facility and Room Design, Opera5ng Procedures, Key Personnel Training, Job Descrip5ons •  Dispensary Licensing •  Financial Modeling, Facility Design, Opera5ng Procedures, Key Personnel Training, Employee Handbooks, Job Descrip5ons •  Cul5va5on Max •  Hourly Consul5ng
  97. 97. Thank You

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