California Cannabis Opportunity Report

Compiled July, 2018

Disclaimer The information contained on this report is of a general nature and is provided for information purposes only and should not be relied upon as a complete definitive statement or absolute source of information. The information in this report is not intended to provide legal, accounting, financial or tax advice, and should not be relied upon in that regard. The authors of this report are not attorneys, nor is this report intended to provide legal advice. Be sure to consult with an attorney regarding any potential liability under federal, state, or local laws if considering direct or indirect participation in the cannabis industry. The authors make no representation, warranty, or undertaking (express or implied) with respect to, and does not accept any responsibility for, (and, hereby, disclaims liability for), the accuracy or completeness of the information contained in this Report. This report was compiled as of July 1, 2018, and given the constantly changing regulatory environment in the California cannabis industry, no warranty is made as to the accuracy or completeness of the information contained in this Report. The information contained within this Report is believed to be accurate as of the date of publishing, but may change over time. The Authors reserve the right, in our sole discretion, to modify, alter or otherwise update this information at any time. As content in this Report is proprietary, any unauthorized use of any materials or information within this Report may violate copyright, trademark and other laws.

Author Biographies

Denver Relief Consulting

Contact: (303) 420-7526

www.denverreliefconsulting.com Mission Denver Relief Consulting’s mission is to persist as advocates for a responsible, professional cannabis industry by working to ensure other well-intending entrepreneurs find opportunity in the rapidly expanding cannabis movement. We use years of industry experience and best practices to offer carefully selected clients and partners consulting services related to custom business strategies, acquisition of cannabis business licenses, facility design, operational best practices, legislative policy development, employee training, vendor relations, regulatory compliance, operational audits, and more. History Denver Relief Consulting (“DRC”) was created in 2010 based on the ideals of our principal’s—Ean Seeb, Nick Hice, and Kayvan Khalatbari—successful vertically integrated cannabis operation, Denver Relief. Denver Relief boasted wins at the inaugural Cannabis Business Awards in the People’s Choice Best Medical Marijuana Center category as well as multiple first, second, and third place wins for flower at The Hemp Connoisseur Championship and the High Times Colorado Cannabis Cup prior to the sale of its licenses to Terrapin Care Station and country music legend, Willie Nelson in 2016. Its mission was to not only find financial success, but to change the societal perception of cannabis operators and consumers through the implementation of best practices considerate of future federal oversight, progressive technologies, minority inclusion, and community integration initiatives. Denver Relief went as far as to create its own multi-award winning volunteer organization, the Green Team, to help contribute to local progressive causes including food security, homelessness, access to the arts, alternative transportation, and scholarships for underserved youth. Following legalization of adult-use cannabis in Colorado, our principals felt they could best serve the industry by expanding this responsible and socially engaged business model in lieu of expanding their brand, and thus Denver Relief Consulting was born. Since then, DRC has received attention from some of the most notable names in media including CNN, 60 Minutes, the Wall Street Journal, CNBC, Inc., GQ, NPR, the Chicago Tribune, the Los Angeles Times, and more. DRC and its principals currently hold licenses in Nevada with Silver Sage Wellness, Illinois with the state’s largest cultivator Cresco Labs, Puerto Rico with Cresco Labs PR, and most recently Pennsylvania with Cresco Yeltrah. In addition, DRC has clients in 18 states, Washington D.C., Canada, Colombia, Australia, and Puerto Rico, and have been awarded numerous licenses including earning

several first and second place application scores in merit-based application states. Our principals and staff are well positioned through board seats and council memberships with the National Cannabis Industry Association, the Resource Innovation Institute, the Minority Cannabis Business Association, The ArcView Investment Group, the Harm Reduction Action Center, Students for Sensible Drug Policy, the Colorado Governor’s Marijuana Education Oversight Committee, the Denver Department of Environmental Health Environmental Stewardship Committee, and several others. Most recently, Denver Relief Consulting worked with Vicente Sederberg and a coalition of more than 100 organizations to plan and manage the ballot campaign for Initiative 300, Denver's Neighborhood-Supported Cannabis Consumption Pilot Program, which was approved by voters in 2016 and is now being implemented to create the nation's first regulated cannabis social consumption program. Philosophy We believe that establishing and implementing a progressive and forward-thinking culture is essential to attracting quality human resources, reliable patrons, and devoted community support in a time when even the most accepting municipalities are pushing back on industry progress. Our unique approach to branding and philanthropic engagement strategies encourages systemic change in the public perception of cannabis as we help clients integrate within their communities and contribute to the normalization of the industry. We are proud to consult with businesses dedicated to the furtherance of best practices, technology, environmental stewardship, community impact, volunteerism, drug policy reform, and equal access for minorities and women, all in the pursuit of responsible cannabis policy reform and an end to the Drug War. Nick Hice Nick Hice is co-founder of Denver Relief Consulting and was the Cultivation Director for Denver Relief—Colorado’s oldest vertically integrated cannabis operation—prior to sale of its licenses to country music legend Willie Nelson and Terrapin Care Station. He is an expert in cannabis cultivation facility design, cultivation facility operations and management, plant care, integrated pest management, environmental stewardship and best practices. He specializes in stabilizing a range of controlled growing environments, minimizing and preventing pest or pathogen damage, implementing comprehensive nutrient monitoring systems, and maintaining regulatory compliance. Nick is a member of the Cannabis Sustainability Work Group via Denver’s Department of Environmental Health, the Technical Advisory Committee via the Resource Innovations Institute, and the Cultivation Committee of the National Cannabis Industry Association. Nick’s work with these groups helps establish sustainable standards and industry best practices across the country. Nick has been involved in cultivation and agriculture for 31 years, 19 of which took place under an array of artificial lighting technologies using soil, soilless, and hydroponic techniques. Nick boasts a reputation of consistently yielding high quality cannabis that has won first, second, and third place prizes at The Hemp Connoisseur Championship and the High Times Cannabis Cup. Nick’s operational knowledge and cultivation expertise are highly sought after having helped implement successful cultivation operations across North America, including work on grows in cold, dry Alaska and hot, humid Puerto Rico. Paired with his ability to field questions and communicate clearly to clients, Nick is a trustworthy advisor at every stage of cultivation development, from facility design to first harvest, through sustaining operations and implementing expansion phases. Nick balances guidance on cultivation system technology and resource sustainability with hyper-compliance toward local and state regulations, and industry best practices. Kayvan Khalatbari

A leading executive in the cannabis industry, Kayvan Khalatbari co-founded Denver Relief, which was the longest-operating cannabis business in Colorado prior to its sale to Willie Nelson in 2016. He is also co-founder for Denver Relief Consulting, which has assisted clients in a dozen states, Puerto Rico, and Canada with winning licenses in merit-based application processes and improving existing cannabis operations. Kayvan is also a founding partner in Cresco Labs, the largest medical cannabis cultivator in Illinois, Silver Sage Wellness in Las Vegas, NV and Cresco Yeltrah in Pennsylvania. Kayvan also has a financial interest in several ancillary cannabis businesses, including High Times, MassRoots, Dymapak, VaporSlide, Manna Molecular Science, US Coffee and BrewBudz, and is a primary investor and Co-Executive Producer for Super Troopers 2. Kayvan has been active in cannabis advocacy and government relations for over a decade and currently sits on the board of directors for the National Cannabis Industry Association, Resource Innovation Institute, Minority Cannabis Business Association, Students for Sensible Drug Policy, Harm Reduction Action Center, and co-chairs a Committee within the Denver Department of Environmental Health to promote environmental stewardship in the cannabis industry. Kayvan also owns three pizzerias in Denver (Sexy Pizza), a comedy production company with operations in half a dozen states (Sexpot Comedy), an arts magazine (Birdy) and is a proud mentor for three children through the Denver Kids program, which he has participated in for almost a decade. He is the founder of art&, a progressive creative collective, and the lead proponent for Denver's 2016 Neighborhood-Supported Cannabis Consumption Pilot Program, which made Denver the first city in the world to regulate the social use of cannabis. Kayvan ran for Denver City Council At-Large in 2015, is a candidate for Mayor of Denver in 2019, and is a tireless advocate in Denver on the topics of harm reduction, food security, homelessness, access to the arts and children's services, with additional board seats on the Art District on Santa Fe and Colorado Youth Symphony Orchestra. Ean Seeb Ean Seeb is co-founder of Denver Relief Consulting and Denver Relief; a nationally recognized boutique cannabis consulting firm and one of Colorado’s former most successful cannabis operations, respectively. Ean specializes in strategic relationship building and brand development. He is a trusted advisor for establishing a professional network, maintaining public relations, and managing business opportunities for direct-to-plant and ancillary cannabis companies. Ean sits on the Marijuana Education Oversight Committee under appointment by Colorado’s Gov. Hickenlooper, as well as cannabis industry rule making committees under appointment by Colorado’s Executive Director of The Department of Revenue. Ean also served multiple terms as Chair and Vice-Chair of the National Cannabis Industry Association and remains an active board member and Policy Council member today. Ean has personally mentored multiple ancillary companies who went on to secure investments from the ArcView Group as well as other investors and has overseen several successful exits and mergers from companies including Rolling Papers, Whaxy, MassRoots, and Denver Relief. He has proven valuable as an advisor or board member for over a dozen cannabis companies by creating opportunities to establish presence in the cannabis industry for young ancillary businesses while helping existing businesses improve their branding, public relations, and partnerships. He is currently on the Board of Directors for the National Cannabis Industry Association, MassRoots, Dympak, Manna Molecular Science and Lighthouse Strategies. Ean has experience working with cannabis technologies including transdermal applications, dosable cannabis concentrates, automated product infusion, and child resistant packaging and labeling. He has testified on behalf of the industry at the local and state level, and has had numerous high-level meetings with federal legislators on topics such as federal banking and tax code reform for state-legal cannabis operations.

Emmett Reistroffer Emmett Reistroffer is a Policy Consultant at Denver Relief Consulting, a freelance writer and a seasoned campaign manager for the cannabis reform movement. Emmett has helped plan and consult legalization campaigns in Oregon, Montana, Washington, DC, and Nevada, and played an instrumental role in the passage of Colorado’s historic Amendment 64 as the lead petition coordinator. With a broad range of non-profit, advocacy and political experience, Emmett formed his own consulting company in 2011 to help organizations, candidates and issue-based campaigns. Emmett’s company served members of both major political parties and provided third parties and independents with needed boosts to compete in key states, including former U.S. Senator Larry Pressler’s independent comeback campaign in 2014. Most recently, Emmett served as the Campaign Director for Denver’s successful Initiative 300 campaign, and after the initiative’s passage, went on to serve on the City of Denver’s social consumption advisory committee to work with citizens stakeholders on implementation. Emmett is involved in his community through a number of capacities, including utilizing his experience and expertise on business licensing by having served as a volunteer licensing authority on the City of Englewood’s Liquor and Marijuana Licensing Board from 2015 – 2016. Having worked closely with cannabis businesses and on several campaigns and recent lobbying efforts, Emmett is eager to promote progressive policy reforms and best practices to advance a robust legal cannabis marketplace.

Marijuana Policy Group

Contact: (303) 551-0607

Info@mjpolicygroup.com www.mjpolicygroup.com

The Marijuana Policy Group (“MPG”) was created in 2014 by BBC Research & Consulting and the University of Colorado’s Business Research Division to bring uncompromising standards to market, policy, and economic analysis in the emerging cannabis industry. Our mission is to provide actionable research and analysis that empowers businesses, government agencies, and investors to make informed decisions within the regulated cannabis industry. Our approach combines sophisticated modeling and forecasting techniques, rooted in economic theory and statistical applications, with a practical understanding of cannabis markets. Recent MPG studies have examined many facets of medical and adult-use cannabis markets, including market size assessments, tax revenue forecasts, optimal licensing structures, economic impacts of the cannabis industry, and market saturation timelines. Additionally, MPG works alongside clients to develop financial feasibility models for cannabis businesses, assessments of short- and long-term market dynamics, and provide general guidance on cannabis market entry opportunities. Since 2014, our team has served as the lead cannabis economist for the State of Colorado Marijuana Enforcement Division (MED), providing market and economic analysis that informs state policy. MPG has analyzed production, transfers, sales, price, potency, and licensing patterns throughout Colorado. In 2015, MPG released a landmark study for the MED that defines scientifically-based production and consumption equivalencies between cannabis flower, edibles, and concentrates. Our experience with real-world data from the most mature cannabis market to date has given MPG deep insights into the regulated cannabis markets that is unrivaled by other market research organizations. MPG has assisted numerous clients successfully obtain cannabis business licenses in both adult-use and medical cannabis states. MPG has developed a comprehensive financial modeling platform that integrates our market size estimates with detailed cannabis operator data and information, as well as state and local regulations, to produce detailed financial projections. These detailed financials strengthen the license application and are also used in securing the required upfront capital investment. Additional MPG experience includes:

• Conducting adult-use and medical cannabis market demand studies in 15 U.S. states for entrepreneurs, investors and governments

• Publishing the first ever Economic Impact Study on Marijuana Legalization in Colorado

• Providing cities and counties throughout the nation with a set of “best practices” for tax policy structure and business license allocation

• Advising foreign governments on cannabis revenue potential and policies to maximize domestic welfare and growth in a fair and equitable manner

MPG research has been recognized by the Brookings Institution, The Wall Street Journal, USA Today, CNBC Business News, 60 Minutes, The Huffington Post, CNN Money, and several other state and local news outlets such as The Denver Post. MPG principals have also been solicited to present at numerous national and international cannabis policy and industry conferences. Adam Orens Adam Orens is a founding partner of the Marijuana Policy Group who brings with him a decade of experience in economics research and cannabis policy. Adam’s expertise range from public finance to market research and regional economic analysis. He received his degree in Economics from Rutgers University and has a Master's degree in Agricultural and Resource Economics from Colorado State. Adam has produced numerous studies explaining the relationships between cannabis markets, demographics, and government policy, which have been recognized by the Wall Street Journal and 60 Minutes, among other notable publications. Adam most recent studies in Colorado, Alaska, Illinois, Maryland, and Vermont aim to give broad insight into the state’s medical and adult-use cannabis markets, including estimates of annual consumption, tourist density, insight into production management methods, and details of the market’s supply channels. Jacob Rowberry Jacob Rowberry is an associate researcher at the Marijuana Policy Group and BBC Research & Consulting. His areas of expertise include economic and fiscal impact analysis, land use economics, and development feasibility studies. He received his undergraduate degree in economics from the University of Colorado and obtained a master’s degree in public policy from the University of Michigan. Jacob has extensive experience developing custom analyses and reports for public and private sector clients across varied industries. Jacob has constructed a series of detailed financial models to provide existing and prospective cannabis businesses with meaningful insight into local medical and adult-use cannabis markets. Jacob was a contributing author and lead data analyst for the Colorado Marijuana Enforcement Division’s 2015 Marijuana Equivalency in Portion and Dosage report. Clinton Saloga Clinton W. Saloga is an associate researcher at the Marijuana Policy Group since early 2016. Before joining MPG, Clinton worked as a policy analyst at the RAND Corporation from 2011-2015, where he completed high profile public policy projects for the World Bank, USAID, and the National Institutes of Drug Abuse. He contributed a special section on cannabis legalization to the United Nation's 2016 World Drug Report, the most comprehensive and noteworthy report on international drug law, use, and production trends. On a grand from the National Institutes of Drug Abuse, Clinton collaborated with prominent RAND drug policy researchers to examine state medical cannabis policies and public health outcomes, resulting in contributions to a number of peer-reviewed academic journal articles. Clinton is a Ph.D. candidate in Policy Analysis at the Pardee RAND Graduate School (PRGS), where his dissertation focuses on the market responses to cannabis legalization in Colorado. He has received several awards for his dissertation research, including multiple James Q. Wilson Dissertation Awards, the Ann & James Rothenberg Dissertation Award, and the ISSDP Conference Scholarship Award. He has been invited to present his research at multiple international and domestic drug policy conferences and

was recognized as an Early Career Scholar at the 2015 International Society for the Study of Drug Policy conference. Clinton earned Master’s degrees in Policy Analysis and Economics from PRGS and Wichita State University respectively, in addition to a Bachelor’s degree in Business Administration from Kansas State University.

McAllister Garfield, P.C.

Contact:

(720) 903-4462 info@mcallistergarfield.com www.mcallistergarfield.com

Founded by Sean T. McAllister, McAllister Garfield, P.C., is a full service business law firm that focuses on the cannabis industry, including ancillary businesses. The firm handles a myriad of legal issues on behalf of its industry clients across the country, especially in Colorado, California, Florida, and Oregon. The Firm assists new businesses and investors with all transactional matters, including entity formation, financing, leasing, acquisitions, real estate, and providing advice on how to obtain licenses to lawfully operate. Beyond start-up, the Firm helps clients understand and maintain full compliance with the complicated rules in this highly regulated industry. The Firm also assists clients in maintaining and expanding their businesses, later stage financing, employment agreements, vendor contracts, licensing agreements, and any other transactional work required of growing a business. The Firm also focuses on mergers and acquisitions, including the buying and selling of cannabis licenses and related businesses. The Firm is well known for defending businesses against alleged rule violations and negotiating successful outcomes, at both state and local levels, including pesticide recalls. The Firm also has significant expertise in environmental compliance and tribal law matters. Sean T. McAllister Sean T. McAllister is the founding partner of McAllister Garfield P.C., and along with his team of nineteen lawyers, the firm focuses its practice on the cannabis industry in Colorado, California, Florida, and Oregon. Sean and his Firm focus on all aspects of cannabis law including regulatory compliance, intellectual property, Indian Law, M&A, business transactions, real estate, tax, and civil litigation. In Sean's role as counsel to dispensaries, he has litigated disputes between owners, sued state and local regulators over enforcement actions, litigated pesticide standards for cannabis grows, negotiated settlements for rule violations allegations, and drafted licensing/endorsement agreements with celebrity personalities. He played an integral role in the drafting of the 2012 cannabis legalization initiative Amendment 64, approved by the voters of Colorado in November 2012. After law school, Sean served as an Assistant Attorney General with the state of Colorado. Sean is a graduate of the University Of Colorado School Of Law, class of 1999. He is licensed to practice law in Colorado and California. Dan Garfield Dan Garfield is a leading cannabis industry business lawyer. Dan represents individuals and businesses in all types of matters and transactions from the start-up stage to exit. He represents owners of dispensaries and cultivation facilities, investors, landlords, lenders, trimmers, oil extractors, edibles

manufacturers, testing laboratories, and ancillary businesses such as social media companies, consultants, and suppliers. His experience includes entity formation and restructuring, mergers and acquisitions, debt and equity financing, licensing, contract negotiation and drafting, and corporate governance and joint ventures, among other legal matters involving cannabis businesses. Distressed financial situations and loan workouts are also part of Dan’s practice. Dan assists corporate debtors, lenders, trustees, creditor committees, and investors, both in and out of bankruptcy court. Dan also litigates cannabis cases and was counsel for the debtors in In re Arenas in front of the Bankruptcy Appellate Panel of the 10th Circuit Court of Appeals. The debtors grew and sold plants as caregivers to medical cannabis patients and were landlords for a retail dispensary and sought bankruptcy protection when they were unable to pay their debts. Dan received his J.D. from Northwestern University School of Law in 1995 and his B.A, from Swarthmore College in 1989. He is a former board member and past president of the Rocky Mountain Chapter of the Turnaround Management Association (TMA) and was a member of TMA Global’s Executive Board and Board of Trustees in 2015. Dan was named a Top Lawyer for cannabis law in 2016 by 5280 Magazine.

History of Cannabis in California

Pre-1996: Cannabis was fully illegal California has always been a leader in cannabis culture and policy reform. In 1913, California was one of the first states to criminalize cannabis. However, in 1972, California cannabis activists attempted to legalize growing, processing, transporting, or possessing cannabis for personal use for adults over the age of 18 through Proposition 19. Proposition 19 failed with 66.5% of voters rejecting the measure. From that time until 1996, all possession, sale, cultivation, or transportation of cannabis remained a crime under California law. 1996: Proposition 215, The Compassionate Use Act In 1996, California became the first state in the nation to create a legal avenue to cultivate and possess medical cannabis with the passage of Proposition 215, also known as the “Compassionate Use Act” (“CUA”). The CUA allowed patients and their designated primary caregivers to possess and cultivate cannabis for personal medical use, subject to a doctor’s recommendation. Patients had the right to use cannabis by either cultivating it themselves or obtaining it from a primary caregiver for the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraines, or any other illness for which cannabis could provide relief. However, there were no clear provisions for the distribution of cannabis in the CUA, and certainly no discussion of retail dispensaries or business licenses. In effect, CUA merely decriminalized the cultivation and possession of cannabis by providing a defense to certain seriously ill patients and their primary caregivers from criminal liability under state law. While a primary caregiver was defined by the CUA as “the individual designated [by a legal patient] who has consistently assumed responsibility for the housing, health, or safety of that person,” the term is generally understood to mean the person growing cannabis for the patient. The CUA did not clearly define the quantities allowed for possession and cultivation. In practice, patients and primary caregivers were required to show that the quantity they possessed was reasonably related to their medical needs. Physicians also had limited immunity under the CUA, meaning they could not be denied any right or privilege by recommending use of cannabis for medical treatment. 2004: Senate Bill 420 In 2004, the California Legislature passed, and the Governor signed, Senate Bill 420, also known as the “Medical Marijuana Program Act” (“MMPA”). Senate Bill 420 established statewide guidelines for the enforcement and interpretation of CUA. Importantly, Senate Bill 420 expanded the limited criminal defense protections under CUA, which merely included possession and cultivation, to include offenses related to transportation, possession for sale, sale, giving away, furnishing, and providing or leasing a premise for the distribution of a controlled substance. In addition, Senate Bill 420 allowed cannabis cultivation by patients and caregivers joining together “collectively or cooperatively” to cultivate cannabis. Collectives could grow, distribute, and be reimbursed for their services in the provision of medical cannabis on a non-profit basis to its members. SB 420 did not create an affirmative right to engage in these activities, but again clarified that those acting in a collective or cooperative manner had a defense, but not a bar, to criminal prosecution. These terms collectively and cooperatively would be later clarified by the California Attorney General’s Guidelines in 2008, as explained below. Senate Bill 420 also set the first clear limits on the amount of cannabis patients and caregivers could

cultivate and possess: six mature or twelve immature plants, and eight ounces of finished cannabis product (including hash products). Later court decisions, including the seminal 2008 People v. Kelly case, clarified that Senate Bill 420’s possession and cultivation limits were the presumptively legal amounts, but that patients and caregivers could argue additional amounts were still defensible under the CUA if it could be shown that increased amounts were reasonable based on medical need. See People v. Kelly, 47 Cal. 4th 1008 (Cal. 2010). Under Senate Bill 420, local governments (i.e., counties and cities) had discretion to set higher possession or cultivation limits. Finally, Senate Bill 420 instructed the California Department of Health to create and maintain a voluntary state ID system helping law enforcement to confirm a patient’s ID and the ability to cultivate, possess, and transport cannabis. In order to assert the protections under the CUA, a formal state ID card is not and has never been required. The doctor’s recommendation was the trigger to create the legal defense. However, the ID card merely provides patients and caregivers added proof or protection. 2007: California Board of Equalization clarifies that cannabis transactions are taxable In 2007, the California State Board of Equalization (“BOE”), an agency responsible for collecting taxes and fees for the state, confirmed that taxing medical cannabis transactions was required under state law. Moreover, BOE explained that cannabis businesses were required to hold a Seller’s Permit, which is a specific registration with the BOE. The BOE clarified that having a Seller’s Permit does not allow individuals to make unlawful sales, but instead merely provides a way to remit any sales and use taxes due. 2008: California Attorney General’s Guideline’s for the security and non- diversion of cannabis grown for medical use In 2008, California’s Attorney General set forth “Guidelines” providing more clarity on the legal structure of collectives, as well as several other guidelines designed to address public safety concerns. The Guidelines were intended to help law enforcement to determine whether one was operating in compliance with state law. Specifically, the Guidelines explained that law enforcement should evaluate the following four things when determining if collectives or cooperatives were operating consistent with state laws: a. If the collective or cooperative has formed a non-profit collective or statutory cooperative; b. If the collective or cooperative has obtained a Seller’s Permit and paid sales tax to the BOE; c. If the collective or cooperative has served only verified patients; and d. If required by the city or county, whether the collective or cooperative has obtained a local business

license. Prior to the Guidelines, the type of entity appropriate for medical cannabis collectives was unclear. The Guidelines explained the proper entity could be either a statutory cooperative (under California Corporations Code) or some other form of entity that operates in a collective manner on a nonprofit basis. As explained below, the most common entity that operators selected to fulfill this requirement was a mutual benefit nonprofit corporation. The Guidelines provided several other useful standards, including the requirement that: a. Collectives cannot distribute to non-members; b. Sales to minors are prohibited; c. Adequate security is required; and d. No cannabis consumption shall occur within a 1000-foot radius of schools. Additionally, regarding payment, the Guidelines explained that collectives could not “sell” the cannabis

to patients, but could be compensated for expenses that were reasonably calculated to cover overhead costs and operating expenses. Consistent with the other laws and guidance prior to the Guidelines, the Guidelines did not explicitly say that any of these activities were legal or fully authorized under state law. Again, the Guidelines only outlined considerations for law enforcement to use to determine if someone should be charged with a crime. How collectives are operating prior to MCRSA/AUMA Given the amorphous nature of many of the rules under the CUA, the California cannabis industry operated in diverse ways prior to the enactment of the 2015 Medical Cannabis Regulation and Safety Act (“MCRSA”), 2016 Adult Use Marijuana Act ("AUMA”), and the 2017 Medical and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”) as discussed in more detail below. The most common corporate formation chosen to operate was the mutual benefit corporation (“MBC”). The MBC is a nonprofit entity organized to satisfy the collective requirement of Senate Bill 420 and the AG’s Guidelines. MBCs have a board of directors and each MBC may issue membership agreements with the members of their collectives. Use of MBCs to operate a medical cannabis business is challenging in many ways. First, MBCs are not designed to make a profit. Next, you cannot sell a nonprofit. Moreover, if the MBC is not set up correctly, members could have claims to MBC assets including the license, intellectual property, and equipment of the MBC. These factors made investment into MBC unattractive to investors. Beginning around 2014, in order to draw profit out of the MBC, many cannabis businesses set up a parallel management company. The management company typically provides services to the MBC, such as operational services, cultivation, transportation, or distribution services. The MBC can pay the management company for the value of the services provided. This model may allow the operators of the collective to verify with law enforcement that they are operating consistent with the AG’s Guidelines, and the collective is not profiting from the operation of the business. A stronger defense for this relationship between the MBC and the management company would require the parties to engage in arms-length transactions at a reasonable market rate in order to explain why the collective meets the nonprofit requirement. Transactions between collectives were challenging as there was no statewide regulatory system authorizing such transfers directly. Therefore, the common practice has been for at least one member of each collective to join the collective on the other side of the transaction in order for each party to claim protections for their activities. For example, a grower in one collective would join the dispensary’s collective in order to explain why that grower was transferring product to the dispensary. Similarly, the dispensary’s collective would join the grower’s collective to explain why they were receiving product for that grower. Another important factor for collectives to consider is the political climate and patterns of law enforcement which often times vary from city to city and region to region. In general, law enforcement in Northern California is more lenient than in Southern California. Police in Southern California were much more likely to charge people in collectives with crimes in cases where compliance with the CUA was not clear. Given the more lenient attitude in Northern California, some operators did not bother with the creation of a MBC. Instead, they merely created for-profit companies, such as LLCs, and drafted operating agreements which stated the company would operate as if it was a nonprofit. Based on all of these considerations, the operation of a collective prior to the commencement of a full statewide regulatory system has been highly dependent on the subjective tolerance of local law enforcement.

State and federal enforcement actions prior to MCRSA and AUMA Federal responses Oakland Cannabis Buyers’ Coop Shortly after the passage of the CUA in 1996, there were a series of lawsuits related to enforcing federal prohibitions on cannabis in California. In 1998, the federal government sued the Oakland Cannabis Buyer’s Coop (“OCBC”), seeking an injunction to stop its dispensary from operating. The federal government argued the activities were illegal under the Controlled Substances Act (“CSA”) in spite of any state legality. In 2001, the U.S. Supreme Court upheld the shutdown of OCBC, finding that medical necessity is not a defense to federal law and that federal criminal laws can be enforced in states that have legalized medical cannabis. See United States v. Oakland Cannabis Buyers’ Coop, 532 U.S. 483 (2001). Gonzales v. Raich In 2002, county deputy sheriffs and agents from the Drug Enforcement Administration (“DEA”) raided a home containing cannabis plants of a state licensed medical cannabis patient, Angel Raich. County officials concluded that her use of cannabis was entirely lawful as a matter of California law. Nevertheless, after a three-hour standoff, the DEA seized and destroyed her six cannabis plants. Raich sued to stop enforcement to the extent it prevented her from possessing, obtaining, or manufacturing cannabis for her personal medical use. The U.S. Supreme Court held that both the Ninth Amendment (reserving all rights to the states not explicitly delegated to the federal government) and the Commerce Clause did not prohibit the federal government from enforcing the CSA in California. See Gonzales v. Raich, 545 U.S. 1 (2005). Together the OCBC and Raich cases clearly established the federal government’s ability to prosecute people under the CSA, even if those activities are lawful under state law. Conant v. Walter Another federal government initial response included threatening to delicense doctors who talked to their patients about medical cannabis. However, in Conant v. Walters, 309 F.3d 629 (9th Cir. 2002), the U.S. 9th Circuit Court of Appeals held that doctors have a First Amendment right to recommend medical cannabis to patients. The Ogden and Cole Memos After President Obama’s election, federal policy became more relaxed toward medical cannabis. In 2009, the U.S. Department of Justice (“DOJ”) released a memo, known as the “Ogden Memo”, which provided direction to U.S. Attorneys around the country regarding cannabis prosecutions. While the Ogden memo affirmed that prosecution of drug traffickers remained a “core priority,” it explained that federal resources should not be focused on individuals whose actions are in clear and unambiguous compliance with existing state medical cannabis laws. Unfortunately, at that time, California still did not have “clear and unambiguous” laws for medical cannabis. In 2013, the DOJ released a more detailed memo, known as the Cole Memo, outlining federal priorities regarding state licensed cannabis businesses. The Cole Memo outlined eight priorities that should guide the DOJ’s enforcement of the CSA. The eight priorities focused on preventing: a. The distribution of cannabis to minors; b. Revenue from the sale of cannabis a from going to criminal enterprises, gangs, and cartels; c. The diversion of cannabis from states where it is legal under state law in some form to other states; d. State-authorized cannabis activity from being used as a cover or pretext for trafficking of other

illegal drugs or other illegal activity; e. Violence and the use of firearms in the cultivation and distribution of cannabis; f. Drugged driving and the exacerbation of other adverse public health consequences associated with

cannabis use; g. The growing of cannabis on public lands and the attendant public safety and environmental dangers

posed by cannabis production on public lands; and h. Cannabis possession or use on federal property. The Cole Memo explained that it was not enough that a state adopts a robust regulatory regime in concept, but whether in practice the state’s regulatory regime prevented cannabis businesses from undermining one of the eight priorities. The Cole Memo was also not a legally binding document preventing the DOJ from prosecuting individuals, even if they did not violate one of these eight priorities. It was merely guidance for federal prosecutors. In general, however, federal prosecutors followed this guidance during the Obama Administration and into the first year of the Trump Administration. However, as discussed below, Attorney General Session issued a memorandum on January 4, 2018, that effectively rescinded the Ogden and Cole memos. 1,000 foot letters While the Obama administration created an environment that generally allowed state cannabis businesses to exist despite federal law, the DOJ administration was not passive on the issue. In 2011, the DOJ sent letters to dozens of cannabis businesses in Colorado that were located within 1,000 feet of schools and required these businesses to relocate or face prosecution. Similarly, in 2008 and 2011, U.S. Attorneys across California sent letters to landlords of cannabis businesses threatening to seek forfeiture of those properties if the landlord did not evict the cannabis tenant – many of whom were also within 1,000 feet of schools. These threatening letters forced many businesses to move. The distance limit from schools under the new state regulatory regime MAUCRSA, discussed below, is only 600 feet, but given DOJ history, locating less than 1000 feet from schools may trigger federal scrutiny. Rohrabacher-Blumenauer Amendment Each year since 2014, Congress has passed the Rohrabacher-Hinchey Amendment, more commonly known as the Rohrabacher-Farr Amendment, (but now known as Rohrabacher-Blumenauer Amendment). The amendment prohibits the DOJ from spending any resources to enforce federal cannabis law against individuals or companies that are in compliance with state medical cannabis laws. This Amendment does not extend to regulated adult-use businesses. Similarly, it does not extend to Native American tribes. The Amendment has been used to dismiss several criminal prosecutions and civil asset forfeiture cases in California, and the 9th Circuit Court of Appeals has upheld those dismissals. The Amendment is currently in effect through September 2017 and must be renewed each year. Generally, the amendment has been passed as a rider to a budget bill. Current House Speaker Paul Ryan has indicated that this amendment will need to go through the regular committee process in the future, making its passage more difficult than as a rider on an appropriations bill. State law enforcement handles 98% of all criminal prosecutions in the country. The DOJ simply does not have adequate resources to prosecute every cannabis case violating federal law. Therefore, as long as the Rohrabacher-Blumenauer Amendment is in effect, any law enforcement activities against medical cannabis operations are likely to take place primarily under California state law. President Trump and Attorney General Sessions Donald Trump’s election as President occurred on the same night that ballot initiatives legalizing

medical or adult-use cannabis were successful in eight out of nine possible states, including the passage of Proposition 64 which legalized adult cannabis use in California. While many legalization advocates hoped the November 2016 election would be the tipping point for cannabis legalization, Trump’s unexpected election has created more uncertainty in federal policy. Shortly after being elected, President Trump appointed Jeff Sessions as the Attorney General. Sessions has said that “good people don’t use marijuana,” and he is well-known as a hard line anti-cannabis drug warrior. However, since his appointment Sessions has made measured remarks and no clear statement that the Trump Administration will seek a mass shutdown of the cannabis industry. Sessions has said he likes several aspects of the Cole and Ogden Memos, but that he might add some additional priorities. He has also stated that the federal government does not have the resources to replace state law enforcement. However, despite Sessions general agreement with certain aspects of the Cole and Ogden Memos, on January 4, 2018, Sessions issued his own memorandum that rescinded the guidance of the Ogden and Cole Memorandums. With the repeal of the Ogden and Cole Memorandums, Sessions instead issued his own guidance to treat marijuana prosecutions the same as all federal prosecutions. The Sessions Memorandum guides US Attorneys to “weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” It is unclear what this means for the cannabis industry moving forward as the Sessions Memorandum was issued days before this publication, but it is certainly a situation that requires the attention of anyone involved or thinking of getting involved in the cannabis industry. Most observers believe it unlikely that Sessions or Trump will attempt to shut down completely the cannabis industry. Rather, many believe the Trump Administration will target bad actors in the industry and make an example of a few individuals or companies that are flagrantly violating state rules. The Rohrabacher-Blumenauer Amendment prevents the DOJ, even under Sessions, from spending may money to prosecute those in compliance with state medical cannabis laws. However, in May 2017, Attorney General Sessions has asked Congress not to renew the Rohrabacher-Blumenauer Amendment. State law enforcement response Until the new statewide regulatory regime MAUCRSA is implemented in 2018, as discussed below, the status of collectives (whether dispensaries, cultivation facilities, or infusion/extraction companies) are grey at best. Given the lack of clarity, it is no surprise that there have been many criminal prosecutions of individuals claiming protections under the CUA. This uncertainty has kept many well-financed individuals and companies out of the industry to date. As noted, there exists a marked difference in enforcement tactics and seriousness between Northern and Southern California. In general, Northern Californian jurisdictions tend to be more forgiving in terms of prosecuting people with some claim to a defense under the CUA. However, law enforcement in Southern California has been more aggressive in alleging violations of the CUA. The passage of MCRSA, AUMA, and MAUCRSA portend a more stable future for cannabis business across the state. Generally, once businesses are fully licensed by their state and local municipality, there will be no question as to who is operating legally and who is not. In addition to criminal prosecutions, local governments have relied on zoning code and civil injunctions to shut down illegal operations. For example, the Los Angeles City Attorney’s Office has shut down hundreds of unlicensed and illegal dispensaries in the City using injunctions. The passage and implementation of MCRSA, AUMA, and MAUCRSA should reduce or eliminate criminal prosecution

because there will be no grey area as to whether a business is or is not licensed. Market Analysis

Intro With the sixth largest economy in the world and a population greater than that of Canada, the excitement and perceived sense of opportunity in the regulated California cannabis markets is understandable, but just how large of a market is it? As a potential California cannabis business owner or investor, it’s easy to want to believe the high market size figures that get thrown around in the media and at conferences, but the reality is that many of these estimates are created from no substance, no data, and a general lack of understanding about the cannabis industry. It’s true that no one can foresee exactly how the cannabis markets in California will ultimately shake out, but taking a methodical approach grounded in market research and economic analysis provides validity to the projections made. MPG and DRC’s analysis of the California cannabis markets comes from an unbiased perspective and employs a proven methodology that is based on observable data and trends, as well as years of operational and policy experience in the regulated cannabis industry.

California’s Regulated Cannabis Market, Resident Demand To estimate the likely number of resident medical cannabis patients and resident adult-use consumers in 2018, we use the combination of cannabis use prevalence data from the most recent National Survey on Drug Use and Health (“NSDUH”), medical cannabis registry data from the California Department of Consumer Protection (“CDCP”), patient estimates from the Marijuana Policy Project (“MPP”), and population projections from the California Department of Finance. Our calculations using these sources indicate that there will be about 870,000 California medical cannabis patients, 1.99 million monthly adult-use consumers 21 years of age and older, and 4.48 million yearly adult-use consumers 21 years of age and older in 2018.

A unique aspect of our estimation methodology is the ability to derive patient and adult-use consumer estimates, and couple these results with cannabis use frequencies and typical consumption amounts by use frequency patterns. For example, recent studies, as well as primary surveys conducted by MPG, reveal that approximately 36.6 percent of past-month respondents use cannabis between one and five days per month and consume 0.67 grams of cannabis flower or cannabis flower equivalent on those days of consumption. Following this user segmentation process, MPG and DRC estimate a total annual demand of 743 metric tons of cannabis flower equivalent in 2018 (not including visitor and tourist demand).

Cannabis Flower Equivalent: Given the increasing trend towards consumption of non-flower products, such as concentrates and infused products, MPG produced a study in 2015 analyzing the relationship between cannabis flower and byproduct to downstream non-flower products. “Marijuana Equivalency in Portion and Dosage” details the derivation of a new measure named “flower equivalent” (“FE”) that converts non-flower consumption or production back into weight-based units of flower or byproduct. This method enables market actors to properly compare supply, demand, potency, and pricing across different product types.

An often-overlooked characteristic of the cannabis market is the split between regulated and unregulated channels. Unregulated channels can be further broken apart into illicit black market operations and gray market operations (home grows, caregivers, etc.), which are not illegal in their own right, but are inherently difficult to regulate and monitor. As we’ve observed in other legalized states, unregulated channels will continue to persist, and the degree to which they remain is dependent upon a number of factors including: tax rates, retail pricing among regulated operators (heavily influenced by upstream production costs), dispensary locations and access, quality and variety of products offered, and supply shortages, among others. Additionally, given the strong presence of current unregulated cannabis production in California, it is plausible that the unregulated supply channels will retain a higher percentage of the market demand than observed in other regulated states such as Colorado and Washington. We estimate that in 2018 regulated channels will account for just over 50 percent of market production, bringing the total resident market demand for regulated channels to 371.5 metric tons of flower equivalent.

California Visitor Demand for Cannabis In addition to estimating California resident demand for cannabis, MPG and DRC also analyze cannabis demand attributable to non-residents (i.e. visitors and tourists). Using 2016 annual visitation data from Visit California, we estimate 2018 visitor demand for California cannabis to be 36.6 metric tons of flower equivalent (excludes in-state residents reported as visitors and tourists). Again, acknowledging that unregulated channels will persist, likely even for visitors, we reduce the total quantity demanded by five percent, equating to 34.8 metric tons of flower equivalent in the regulated channels. Total regulated demand in 2018 is estimated to be 222.9 metric tons of medical cannabis and 183.4 metric tons of adult-use cannabis

California Product Market Share Prior to taking the market demand estimate and calculating a market size in terms of annual sales, it is imperative to estimate the cannabis product type market shares. Consumers in the California regulated cannabis markets will have several cannabis product types to choose from, including flower, edibles, concentrates (predominantly pre-filled vaporizer cartridges), and infused non-edibles. In recent years, the popularity of infused products and concentrates has grown significantly in states with regulated sales, and not accounting for these various product types and their respective prices significantly limits the accuracy of market size estimates.

From observable data and communication with cannabis industry operators, we anticipate cannabis flower to continue to dominate product market shares, with 79 percent in the medical market and 68 percent in the adult-use market in 2018. Despite cannabis flower’s sizeable edge over the other product categories, its relative market share has declined in recent years, more notably on the adult-use side. Concentrates are the next most popular product type in the medical market at 11 percent, while in the adult-use market it’s infused edible products with 16 percent. Infused non-edible products (topicals, salves, transdermal patches, etc.) are three and four percent for the medical and adult-use markets, respectively. In addition to determining market sales calculations, these product splits also inform upstream cultivation and manufacturing decision-making, such as the demand for high-quality “craft” flower, whether to invest in specific automation or manufacturing equipment, etc.

Market Size To estimate annual market size, MPG and DRC surveyed current cannabis product pricing in California’s medical market, as well as reviewing pricing trends in other regulated cannabis markets. After developing average prices for the four product types in both the medical and adult-use markets, we apply them to the previously estimated flower equivalent market demand. In 2018, we estimate the regulated California medical cannabis market to be $2.11 billion and the adult-use cannabis market to be $1.61 billion, totaling $3.72 billion. Forecasting beyond 2018, we take into account continued reduction of unregulated channels (black and gray market operations), a gradual decrease of medical cannabis patients, fluctuations in product pricing, and potential consolidation of cannabis operators. Over the course of a five-year period, we expect the total California cannabis market to grow by 61.4 percent.

Local Demand and Market Size Considerations The estimates presented throughout this section take into account statewide demographics and characteristics. Therefore, merely scaling the estimates in this report to a local market’s population would lead to errant results. Instead, the development of estimates for a local or regional market (neighborhood, city, county, etc.), which is a critical component of a sound business plan, must account for variances between California as a whole and the sub-state geography of interest. An additional

consideration is the local tax and fee structure faced by cannabis businesses. For example, understanding how a city- or county-imposed excise tax, in addition to state levied taxes, impacts the business’ pricing structure—ultimately affecting market share and revenues—is important in deciding where to locate your cannabis business.

Financial Aspects Of Cannabis Operations The initial financial requirements, as well as the short- and long-term financial risks and rewards, are two of the most important considerations for prospective cannabis business owners and investors. Prior to wading into the cannabis industry, one must realize that there is a great deal of uncertainty and variability when it comes to financial performance. As with the lofty market projections often touted, be cautious of headlines and reports that make it appear every cannabis business is financially successful - the reality is that many are facing financial hardship, for a great number of reasons.

There is no substitute for developing a financial and operating model specific to one’s potential operation, which will allow the estimation of realistic startup costs, revenues, and operating expenditures. Through the modeling process, one will also identify market opportunities and risks, as well as business strengths and vulnerabilities.

Typical startup capital costs include:

• Pre-operational labor;

• Facility design;

• Permits and licenses (application fees, building permits, etc.);

• Site and utility upgrades;

• Facility construction and/or renovation (shell construction, tenant finish, MEP systems, etc.);

• Facility equipment and supplies (grow lights, extraction machines, etc.); and

• Professional services (legal, accounting, consulting, etc.).

The overall profitability of the cannabis operation will be determined by the realized revenues less the operating expenses, as well as outstanding financial obligations incurred during the startup phase. As

observed in states with mature regulated cannabis markets, a business’ revenues are a function of brand recognition and customer/patient loyalty, competitive pricing, marketing efforts, and competition in the marketplace. Observable and inferred revenue data from cannabis businesses indicates that revenues for most cannabis enterprises are highly volatile with fluctuating product pricing due to market demand-supply imbalances, constantly evolving regulations and compliance requirements, and changes in consumer behavior (e.g., product type or strain preferences).

The other side of the profitability equation is operating expenses. A common occurrence among new cannabis businesses is a period of trial and error, which frequently translates to inefficient business practices and high operating costs. Avoiding these business pitfalls is critical in the early months as businesses seek to establish their place within the market and demonstrate financial viability. A knowledgeable management team, adoption of standard operating procedures, and scaling operations appropriately are some of the cornerstones to running an efficient cannabis business and minimizing operating expenses, while also positioning the business for short- and long-term financial success.

Typical operating expenses include:

• Licenses and Fees;

• Rent or Mortgage;

• Costs of Goods Sold;

• Utilities;

• Payroll and Benefits;

• Education and Marketing;

• Non-Direct Supplies;

• Testing and Compliance;

• Insurance;

• Security;

• Technology;

• Cleaning, Maintenance and Repairs;

• Waste Removal;

• Professional Services; and

• Community Reinvestment.

Statewide Regulatory Overview

MCRSA On September 11, 2015, the California state legislature passed a trio of bills (AB 266, AB 242, and SB 643) collectively known as the Medical Marijuana Regulation and Safety Act (“MMRSA”). Together, these bills created an entirely new regulatory framework by creating clear rules, for the very first time, regarding state and local licensing for medical cannabis businesses. Since its passage, all references in California law to “marijuana” have been replaced by the word “cannabis”. Therefore, these bills are collectively known as “MCRSA”. On April 28, 2017, draft regulations for implementing MCRSA were released. However shortly thereafter, on June 15, 2017, the California Legislature passed Governor Jerry Brown’s Budget Trailer Bill (“Trailer Bill”), which effectively repealed and replaced MCRSA and added portions to AUMA to form one new unified regulatory framework for both medicinal and adult use now called the Medical and Adult Use Cannabis Regulation and Safety Act, which is detailed below. The summary below of MCRSA highlights the basic big picture concepts from the MCRSA and the draft regulations from April 2017, and notes where these important provisions have been changed by MAUCRSA. Regulatory agencies MCRSA created a new department, the Bureau of Medical Cannabis Regulation, housed within the California Department of Consumer Affairs, which is the lead agency in charge of the full implementation of MCRSA. Specifically, the Bureau oversees cannabis transportation, storage, distribution, sales, and testing. This body has been renamed the Bureau of Cannabis Control (“Bureau”) under MAUCRSA. The current head of the Bureau is Lori Ajax. The Department of Food and Agriculture, through its CalCannabis Cultivation licensing program, oversees cannabis cultivation. CalCannabis will be tasked with issuing plant tags and is developing and implementing the track and trace program. The program is run by Amber Morris. The State Department of Public Health headed by Karen Smith, through its Office of Manufactured Cannabis Safety (“OMCS”), oversees cannabis extractors and infused product manufacturers. Finally, there are additional state agencies who also play a role in helping to regulate California’s cannabis industry, including: a. The state Department of Pesticides, which determines pesticide residue standards and application

methods; b. The California Department of Tax and Fee Administration, which oversees the issuance of Seller's

Permits, helps develop the track and trace program, and helps manage tax revenue; c. The State Water Resources Control Board, which develops water and pesticide management

standards; d. The Department of Fish and Wildlife, which helps develop water management standards; e. The state Department of Justice, which oversees fingerprinting and criminal background checks; and f. State law enforcement, which performs delivery compliance checks and criminal law enforcement.

Ownership The definition of owner under MCRSA was different depending on the level of ownership and the type of entity. Owners were allowed to be individuals, private companies or publicly traded companies.

Ownership for publicly traded companies included all stockholders with more than a 5% interest in the company. For all businesses other than publicly traded companies, an owner was defined as:

(1) An individual that has an aggregate ownership interest, other than a security interest, lien, or encumbrance, of 20 percent or more in the commercial cannabis business; (2) The chief executive officer and all members of the board of directors of an entity when that entity has an aggregate ownership interest, other than a security interest, lien, or encumbrance, of 20 percent or more in the commercial cannabis business; or (3) An individual that will be participating in the direction, control, or management of the licensed commercial cannabis business.

Under MAUCRSA, the definition of owner for licensees adopted the AUMA standard, which means a person with an aggregate ownership interest of 20% or more in the person or entity applying for a license, unless that interest is solely a security, lien, or encumbrance. This is explained in more detail below in the MAUCRSA summary.

Residency Restriction MCRSA had no residency restriction while AUMA did. However, MAUCRSA removes all residency restrictions which means California residents, out-of-state residents and non-U.S. citizens are allowed to own licenses. Priority Licensing and Continuing Operation after January 2018 prior to licensing Under MCRSA, cannabis businesses that were lawfully operating under California state law and with relevant local licensing before January 1st, 2018, were allowed to continue operating while their applications were reviewed. To take advantage of this provision, existing businesses must have applied to the Bureau no later than July 2, 2018, and the continuing operations must have been the same commercial cannabis activity as the license type for which the applicant is applying. Also, the applicant must not have changed the location of its operation from its pre-2018 location to qualify for priority licensing. The Bureau will determine whether an applicant was lawfully operating by reviewing the date on which the applicant began actively conducting the same commercial cannabis activity as the license type for which the applicant is applying, (i.e. transportation, distribution, testing or sales). Evidence to fulfill this requirement includes articles of incorporation, certificate of stock, articles of organization, certificate of limited partnership, statement of partnership authority, tax form, local license/permit, receipts, and other business records. The applicant must also provide proof of good standing with the local jurisdiction. Businesses that were operating legally before January 1, 2016, will have priority during licensing under the new regulatory model, MAUCRSA, as explained below. Businesses that were operating with local approval before July 1, 2015, will also be permitted to keep their current business structure, regardless of limitations on owning licenses in different categories as set out below. If a cannabis business does not apply for a permit under the MCRSA or AUMA, it will lose all protections under California law (see the California Health & Safety Code 11362.775 i.e. the Collective/Cooperative Model) one year after the first licenses under MCRSA are issued. The Bureau expects to start issuing licenses in the January of 2018, at the earliest. Therefore, it is expected that sometime in early 2019 operators without a license will no longer be able to assert the defenses to criminal prosecution under the collective or cooperative model.

These provisions are unchanged by MAUCRSA. Applicants with prior criminal convictions MCRSA did not outright ban awarding licenses to individuals with prior felony convictions. To disqualify someone, the felony must be substantially related to a qualification necessary for licensure. There is a long list of potentially disqualifying felonies, including those involving controlled substances, violence, embezzlement, fraud, and deceit. If an applicant has a prior criminal conviction, the applicant must submit a statement of rehabilitation demonstrating the applicant’s fitness for licensure, which may include a certificate of rehabilitation and dated letters of reference from employers, instructors, or professional counselors. As explained below, MAUCRSA modified this provision and adopted the AUMA rule, which states that a felony drug conviction alone cannot the sole grounds to disqualify an applicant.

Local Control and Licensing All commercial medical cannabis activity must be licensed by both the state and local governments. Local jurisdictions will retain power to regulate above and beyond the minimum threshold established by MCRSA. This includes all existing local land use regulations, including zoning rules, setback requirements, hours of operation, and imposition of all applicable local rules and standards (i.e., building and electrical codes). Additionally, this means local governments may also institute bans and moratoria to prevent the operation of medical cannabis businesses.

Permitted corporate entities MCRSA suggests that for-profit entities are allowed, along with nonprofit entities. However, the language in MCRSA was ambiguous enough to lead some legislators to believe that clarification was necessary to determine that for-profit entities, such as corporations or LLCs, were explicitly permitted under the act. MAUCRSA fixes this ambiguity and makes clear that licensees can be for-profit entities beginning in 2018. Until MAUCRSA is implemented and applicants receive state and local licenses, all cannabis businesses must continue to comply with the CUA, SB 420, the California Attorney General’s Guidelines and to continue to engage in business in a not-for-profit manner. Finally, regardless of the corporate entity allowed at the state level, it is important to comply with any local government entity restrictions. For example, some jurisdictions that permitted the operation of storefront collectives prior to the passage of MCRSA require businesses to operate as a nonprofit. Many of these local regulations will not be amended prior to the beginning of 2018 because of the slow pace of local government. In those cases, while MAUCRSA allows for-profit businesses, some businesses must remain as nonprofits to comply with local law.

License Types MCRSA created seventeen different types of cannabis business licenses. The license types were modified by MAUCRSA as explained in more detail below. Vertical integration

MCRSA restricted medical cannabis business owners to having licenses in only two license categories (e.g., only distributor and transporter). This is commonly referred to as a restriction on vertical integration. Under MCRSA, the vertical integration restriction would have been suspended on January 1, 2026. However, MAUCRSA eliminates most of restrictions on vertical integration as explained below.

AUMA AUMA passed in November 2016 with a statewide majority of 57%. AUMA instructs the Bureau to craft regulations that govern the sale and distribution of adult-use cannabis (a.k.a. recreational). Below is a summary of the most important provisions of AUMA and notes where MAUCRSA has made substantial revisions to AUMA Regulatory agencies For the most part, the regulatory agencies and their responsibilities are the same as above for MCRSA. However, under AUMA the following additional state agencies play a role in the compliance process: • Cannabis Control Appeals Panel, which is the new administrative appeals panel to hear appeals of

license enforcement decisions; • Board of Forestry and Fire Protection, which help oversee cultivation operations; • California regional water control boards, which help oversee cultivation operations; and • Division of Occupational Safety and Health, which will develop industry-specific regulations by

October 1, 2018. Ownership The definition of owner under AUMA is a person who has ownership of 20% or more of any single cannabis business. A security interest, lien, or encumbrance does not constitute ownership. Residency restriction AUMA placed a residency restriction on owners; however, this has been repealed in MAUCRSA. In other words, MAUCRSA allows owners to be California residents, U.S. residents, or residents of any country throughout the world. Priority licensing Priority for licensure will be given to adult use cannabis business applicants who “can demonstrate to the authorities’ satisfaction” that the applicant was operating in compliance with CUA or MCRSA prior to September 1, 2016. Local jurisdictions must determine for the Bureau whether the applicant seeking priority was in operational compliance with existing medical cannabis provisions. Licensing requirements AUMA will not require an active local cannabis business license to apply for a state cannabis business license, however businesses will still be required to have both licenses before they start operating. The Bureau has expanded discretion to deny issuing or renewing licenses for zoning and environmental issues, specifically referencing cultivation sites that may affect watersheds, businesses located in areas with “excessive concentrations” of other cannabis businesses, and a vague definition of illegal monopolies. Applicants with prior criminal convictions The standards for applicants with a criminal conviction are similar to the standards in MCRSA. However, under AUMA, a prior conviction for a controlled substance offenses are not by itself the only grounds for rejecting an applicant. Local control and licensing Each adult use cannabis business must be licensed by both state and local governments. Localities may ban all adult-use cannabis businesses within their jurisdiction. Localities may also enforce, among other things, local zoning and land use requirements, business license requirements, and requirements related

to reducing exposure to second hand smoke, including bans on cannabis consumption on the premises of state licensed retailers or microbusinesses. Localities may also increase the 600 feet radius restriction related to proximity to schools. Corporate entities AUMA allows for-profit businesses to operate licenses and allows publicly traded companies to own adult-use licenses. License types The AUMA created nineteen types of adult-use cannabis licenses; thirteen of which are cultivation licenses distinguished by size. AUMA relies on MCRSA for cultivation size designations. The other six license types are Level 1 Manufacture, Level 2 Manufacture, Tester, Retailor, Distributor, and Microbusiness. Fees for AUMA applications and licenses have yet to be determined. MAUCRSA slightly modified the license types to harmonize AUMA with MCRSA. A full list of license types available under MAUCRSA is listed below. Vertical integration AUMA has fewer restrictions on vertical integration compared with MCRSA. There are generally no special restrictions on owning multiple dispensary, cultivation, or manufacturing licenses. However, the Bureau does have the discretion to deny an application for a license for multiple reasons including “excessive concentration of licensees.” At this time the Bureau has not defined excessive concentration. A testing license holder cannot hold any other types of license. When the largest tier of cultivation licenses, Type 5 licenses, will be issued in 2023. Licensees in that tier will be permitted to also hold either a volatile or a non-volatile manufacturing license and a dispensary license. They may not hold smaller types of cultivation licenses, distributor licenses, testing licenses, or microbusiness licenses. Packaging and labeling Product labels must provide the net weight, origin, age, and type of product as well as milligram amount per serving of THC and other cannabinoids, and any pesticides used during cultivation. AUMA requires specific label warnings on all cannabis products. For cannabis flower labels, such warnings must be capitalized and include the following: • “Government warning: This package contains marijuana, a schedule I controlled substance. • Keep out of reach of children and animals.; • Marijuana may only be possessed or consumed by persons 21 years of age or older unless the

person is a qualified patient; • Marijuana use while pregnant or breastfeeding may be harmful; • Consumption of marijuana impairs your ability to drive and operate machinery; and • Please use extreme caution.” For cannabis products other than flower, such warnings must be capitalized and include: • “Government warning: This product contains marijuana, a schedule I controlled substance. • Keep out of reach of children and animals; • Marijuana products may only be possessed or consumed by persons 21 years of age or older unless

the person is a qualified patient; • The intoxicating effects of marijuana products may be delayed up to two hours. • Marijuana use while pregnant or breastfeeding may be harmful;

• Consumption of marijuana products impairs your ability to drive and operate machinery; and • Please use extreme caution.” The Schedule I warning can be removed if and when the federal government reschedules cannabis. Onsite Consumption Under AUMA, onsite consumption of cannabis at dispensaries is allowed if permitted by the local jurisdiction. MAUCRSA adopted a version of this which allows local jurisdictions to permit onsite consumption at county fairs, district agricultural association events, and other dispensaries or microbusinesses with a few restrictions. Local and state taxation AUMA allows for local taxation on adult use cannabis. Each jurisdiction that permits adult use cannabis is generally adopting an additional tax of anywhere between 2-15 percent on cannabis sales. The state will impose several specific taxes on cannabis in addition to regular sales taxes. In addition to the sales tax imposed by local jurisdictions, a 15 percent excise tax will be imposed on the gross receipt of any cannabis products, goods, or services purchased, and paid quarterly to the BOE by the retailor or microbusiness. The 15 percent excise tax does not apply to medical patients who present a California medical cannabis card at the time of sale. Additionally, after January 1, 2018, the state will tax production of cannabis at the following rates once product has been harvested, dried and cured: $9.25 per one ounce of cannabis flower, and $2.75 per one ounce of cannabis leaves. The BOE may add categories of products to be tested. Beginning January 1, 2020, the BOE may adjust taxes annually for inflation. To verify the payment of the state tax, the cannabis business will be given either a tax stamp or a special bag to contain the taxed cannabis. Whether designation is by stamp or bag, AUMA anticipates that either method will enable the BOE to electronically scan the product (track and trace system) to verify tax payment. No cannabis may be removed from a cultivation facility until the tax has been paid. The state revenues generated from the cultivation and sale of adult-use cannabis will be deposited into the California Cannabis Tax Fund. Revenue paid to the fund is allocated 60 percent to youth programs, 20 percent to environmental damage cleanup, and 20 percent to public safety. Appellation Regional appellation, such as “Humboldt or Mendocino grown” is regulated by AUMA. The Bureau will establish standards for recognizing a particular appellation of origin applicable to cannabis grown or cultivated in a certain geographical area. Cannabis cannot be marketed, labeled, or sold as grown in a California county when the cannabis was not grown in that county. The standards for allowing appellation will be established by January 1, 2020. Advertising restrictions All advertisements must accurately and legibly identify the licensee responsible for the content. Licensees cannot advertise in broadcast, cable, radio, print and digital medium if less than 71.6 percent of the medium’s audience is reasonably expected to be 21 years of age or older. Any direct marketing must ensure that the recipient is 21 years of age or older. Advertisements cannot be false or misleading. MAUCRSA requires these restrictions, as well as additional restrictions such as the regulation of online advertising and the creation of a universal symbol for edible cannabis products.

Home cultivation and possession All adults over 21 years of age in California may grow up to six plants and possess up to one ounce (28.5 grams) of cannabis flower or product for personal use. Any amount derived from those six plants exceeding one ounce must be kept within the person’s private residence, and locked in a space that is not visible by normal, unaided vision from a public place. Industrial hemp AUMA also legalized industrial hemp. The possession, use, purchase, sale, cultivation, processing, manufacture, packaging, labeling, transporting, storage, distribution, use and transfer of industrial hemp will be regulated by the Department of Food and Agriculture (“CDFA”). The CDFA is developing a program to administer the state’s Industrial Hemp Farming Act. Until this occurs, there is no effective registration process for private commercial growers. Only established agricultural research institutions, including public and private institutions, are exempt from registration and may currently grow hemp in California. When registration is available, private growers must register with their local county agricultural commissioner, rather than with the CDFA.

MAUCRSA, also known as the Trailer Bill On June 15, 2017, the California Legislature passed Senate Bill 94, also known as the Trailer Bill. The Trailer Bill made significant changes to existing law by repealing MCRSA in its entirety, amending sections of AUMA, and replacing MCRSA with one integrated regulatory framework for medical and adult-use cannabis which is now called the Medical and Adult-Use Cannabis Regulation and Safety Act, referred to throughout this report as MAUCRSA. Given the inconsistencies between MCRSA and AUMA, as demonstrated above, MAUCRSA harmonizes these differences making it much more industry friendly. MAUCRSA became law July 1, 2017. While many of the MAUCRSA provisions are integrated into the summaries of MCRSA and AUMA above, below is a summary of the most important provisions of MAUCRSA. On November 16, 2017, the Bureau of Cannabis Control, the Department of Food & Agriculture, and the Department of Public Health each released their emergency regulations to regulate both adult-use and medicinal commercial cannabis activity. Further, these emergency regulations are not permanent, as the regulatory bodies did not have time prior to January 1, 2018, to engage in the complete rulemaking process. On June 6, 2018, new versions of the emergency regulations were adopted by the three state regulatory authorities, which are expected to be the last set of emergency regulations adopted before the permanent rules are established by November of 2018. While the emergency regulations likely represent a near complete set of rules for the industry, the formal rule making process commenced in July of 2018 and will be finalized by late 2018 after a public comment period that ends on August 27, 2018. Given the fluid nature of these rules, it is critical to consult with an attorney prior to engaging in any project under MAUCRSA to ensure you fully understand the most up to date rules. All the rules below apply to both medical and adult-use licenses. Residency There is not a residency requirement to own or operate a medicinal or adult-use cannabis business under MAUCRSA. Meaning, MAUCRSA allows medical and adult-use owners to be California residents, U.S. residents, or residents of any country throughout the world. Ownership MAUCRSA defines ownership as any person or entity owning a 20 percent or greater stake, the CEO of a nonprofit or other entity, a member of the board of directors of a nonprofit, or an individual who participates in the direction, control or management of the licensee. The emergency regulations further clarify that an individual participating in the direction, control, or management of the licensee is a general partner of a business organized as a partnership, a non-member manager or managing member of an LLC, or an officer or director of a licensee organized as a corporation. Similar to the MCRSA draft regulations, it is expected that owners below that threshold will still need to be disclosed, but they will not be required to undergo as extensive of a background investigation.

License Types There are currently 20 license types under MAUCRSA. These are:

License Type Size Distinction

Type 1 – Cultivation – Specialty Outdoor, Small

Up to 5,000 sq. ft. No artificial light

Type 1A – Cultivation – Specialty Indoor, Small

Up to 5,000 sq. ft. Artificial light

Type 1B – Cultivation – Specialty Mixed Light, Small

Up to 5,000 sq. ft. Combination of natural and artificial light

Type 1C – Cultivation – Specialty Cottage

Up to 2500 sq. ft. for mixed light, up to 50 outdoor mature plants, or 500 sq. ft. of indoor cultivation

Combination of natural and artificial light, all on one premise

Type 2 – Cultivation – Small Outdoor

5,001-10,000 sq. ft. No artificial light

Type 2A – Cultivation – Small Indoor

5,001-10,000 sq. ft. Artificial Light

Type 2B – Cultivation – Small Mixed Light

5,001-10,000 sq. ft. Combination of natural and artificial light

Type 3 – Cultivation – Outdoor 10,001 sq. ft. – 1 ac. No artificial light

Type 3A – Cultivation – Indoor 10,001 sq. ft. – 22,000 sq. ft.

Artificial light

Type 3B – Cultivation – Mixed Light

10,001 sq. ft. – 22,000 sq. ft. Combination of natural and artificial light

Type 4 – Nursery No size designation currently available

Producing clones, immature plants, and seeds

Type 5 – Large Outdoor + 22,000 sq. ft. (currently unavailable)

No artificial light

Type 5A – Large Indoor + 22, 000 sq. ft. (currently unavailable)

Artificial light

Type 5B – Large Mixed Light + 22,000 sq. ft. (currently unavailable

Combination of natural and artificial light

Type 6 – Manufacturer 1 No size restrictions Using non-volatile solvents

Type 7 – Manufacturer 2 No size restrictions Using volatile solvents

Type N – Infusion No size restriction May only infuse and pack manufactured cannabis products – cannot perform any extraction

Type P – Packaging No size restriction May only package manufactured cannabis – cannot infuse or extract

Type S – Shared Kitchen (anticipated to be available sometime in 2018)

Less than $500,000 gross annual revenue

May only extract through use of butters and cannot resell any raw butter produced – all butter produced must be infused into foods prepared by the S licensee.

Type 8 - Testing No size restrictions Cannot own any other license type

Type 9 – Non-storefront delivery retailer

No size restrictions Physical premises required, but cannot be open to the public for on-site retail sales

Type 10 - Retailer No size restrictions Sells cannabis products to end users

Type 11 – Distributor; Self-Distribution; and Transport Only

No size restrictions Distributes cannabis products between producers and retailers

Type 12 - Microbusinesses Up to 10,000 sq. ft. of cultivation, no size restrictions on distributor and retailer license types under this category

Must perform at least 3 of the following activities within single location: Retail; Manufacturing; Cultivation; or Distribution

Cannabis Event License Must apply for annual event license from the Bureau + requires license for each individual event

MCRSA’s Type 10A license (allowing a bundle of three dispensary licenses, up to four acres of cultivation, and one manufacturer license) will not be available. However, because there are no specific limits on the number of Type 10 dispensary licenses that one group can have, this exclusion is largely irrelevant. The Bureau will still be able to limit dispensary licenses to avoid excessive concentration or

monopoly issues, however, it is anticipated that the Bureau will leave it to the local municipalities to determine the concentration of business within their jurisdiction. MAUCRSA also removes the transporter license. It is expected that distributors will handle all transportation activities, and that no additional license beyond a distributor license will be needed. AUMA provided that the largest allowed cultivation license, defined as at least one acre of outdoor cultivation and greater than 22,000 square feet of mixed or indoor cultivation area, will be unavailable until 2023. MCRSA did not provide for this license type. MAUCRSA adopts the AUMA provision and allows for Type 5 licenses, but again only beginning in 2023. MAUCRSA prohibits large cultivation licensees from obtaining distributor or microbusiness licenses. Type 12 microbusiness licenses are available under MAUCRSA, which allows cultivation of up to 10,000 square feet of canopy, non-volatile manufacturing, permission to act as a distributor, and retail business functions including deliveries and smoking lounges where locally permitted. To qualify for this license type the licensee must conduct 3 of the 4 above mentioned activities at the same location. Co-Location of Licenses A licensee may have two separate commercial licenses (i.e. adult-use and medicinal) on the same premise if: (1) the licensee holds both an A and M license for the identical type of commercial activity; (2) the licensee who holds both licenses is identical in name, business form and ownership; (3) the licensee only conducts one type of commercial cannabis activity in the premises (i.e. retail or distribution only); (4) all cannabis products are labeled as M or A; and (5) records are kept separately. Further, the Bureau has stated that a “premise” need not be its own physical address, but rather, the licensee can designate the areas within their operation where separate commercial cannabis activities will be conducted so long as they are properly delineated and licensed. For example a business can operate out of one building and conduct both manufacturing and cultivation operations within the building, but the licensee must designate separate premises within the building for each activity. Licensing Requirements Licensing applications may be completed online or submitted in hard copy format at the agency in charge of the desired license. The list of licensing requirements under the emergency regulations includes the following:

• The name of the applicant and all business trade names (i.e. DBAs); • The type of license the applicant is applying for including the distinction of A (adult-use) or M

(medicinal) license types; • Payment of relevant application fees; • A list of all commercial cannabis licenses the applicant holds whether from any state cannabis

regulatory authority; • Whether the applicant has been denied a license by any other state cannabis licensing authority; • The physical address of the premises, the mailing address (if different from the premises), the

telephone number of the premises, and the website and email address for the business; • The business’ federal employment identification number; • A description of the organization of the business (i.e. corporation, LLC, partnership, etc.) • The business formation documents; • The following financial information:

o Funds belonging to the applicant held in savings, checking or other institutional

accounts; o List of loans made to the applicant; o A list of investments made into the business; o A list of gifts of any kind made to the applicant for its use in the commercial cannabis

activity; • A complete list of every person who has a financial interest in the business; • A complete list of every “owner” and the following information for background check purposes:

o Full name; o Title: o Date and place of birth; o Their social security number or taxpayer ID; o Their mailing address; o Their telephone number; o Their email address; o Their current employer; o The percent of the owner’s ownership interest; o Any financial interest in other licensees; o A copy of the owner’s government issued ID; o A detailed description of any of the owner’s criminal convictions including the date of

conviction, incarceration, probation, parole, a description of the offenses, and a statement of rehabilitation for each conviction;

• If applicable, a description of any suspension or revocation of a cannabis license, or sanctions for unlicensed cannabis activity within the previous three years;

• Evidence that the applicant has the right to occupy the proposed premises by either a lease or ownership document;

• A valid sellers permit issued by the Department of Tax and Fee Administration; • A premises diagram; • Proof of a $5,000 bond; • The applicant may provide proof of a local license, permit, or authorization; • A description of all operating procedures, including:

o Transportation procedures; o Inventory procedures; o Quality control procedures; o Security procedures;

• Evidence of compliance with or exemption from the California Environmental Quality Act. Vertical Integration MAUCRSA eliminates most of restrictions on vertical integration. The elimination of the restrictions on vertical integration is perceived as a huge win for the cannabis industry as it eliminates the MCRSA requirement of third-party distribution. Any license type may also hold a distribution license, except for testing licensees. MAUCRSA still does have some cross-licensing restrictions. As noted, Type 5 cultivation licenses of larger than one acre, which are permitted under AUMA beginning in 2023, will not be able to hold a distributor, testing lab or microbusiness license. Additionally, testing labs will not be able to hold any other license type. Beyond those two restrictions, any combination of licensure is now permitted.

Retail License A retail license is required to conduct retail sales to medical patients and/or adult use cannabis customers. “Dispensary” means “a facility where medical or adult-use cannabis, medical or adult-use cannabis products, or devices for the use of adult-use cannabis or medical cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers, pursuant to express authorization by local ordinance, cannabis and cannabis products as part of a retail sale.” There is no limit on how many dispensary licenses a licensee may hold, except that the Bureau retains authority to deny additional dispensary licenses based on concerns about market monopolization. Further, many local jurisdictions limit the number of retail licenses one business entity may hold. Each dispensary must have a limited access area where cannabis is stored and prepared for sale. No one other than badged employees will be allowed in the limited access area. Prior to allowing a medical cannabis patient into the retail area, the dispensary shall confirm the patient has a valid recommendation (for medicinal cannabis sales) and shall check the patient’s identification to ensure that they are at least 21 years old (for adult-use cannabis) or at least 18 years old for medicinal cannabis. In order to allow a primary caregiver access to the retail area, the dispensary shall confirm the caregiver has the proper documentation of the patient which contains the signature of the patient. Under the Bureau’s emergency regulations dispensaries may sell no more than eight ounces of medical cannabis in a single day to any patient or primary caregiver. Further, an adult-use customer may not purchase more than 28.5 grams of cannabis and 8 grams of concentrated cannabis in a single day. No free adult-use cannabis samples are permitted, and licensees may not allow their representatives to provide free samples to adult-use customers either. However, an M licensee may provide free medicinal cannabis and medicinal cannabis products to medicinal cannabis patients if certain requirements are met by the retailer. Each purchase must be in an opaque and child resistant exit package containing all required labeling. A licensed dispensary must keep accurate records of every sale made to all customers. Under the emergency regulations, businesses are given a grace period to come into compliance with several aspects of the new regulations. For instance, a dispensary may sell its inventory of untested medical cannabis goods until July 1, 2018, if the dispensary places a label on each package with the following statement: “This product has not been tested under the Medicinal and Adult-Use Cannabis Regulation and Safety Act.” Moreover, during this period a dispensary may package and sell cannabis goods in its inventory that have not been packaged by a cultivator or distributor before its transported to the dispensary. Additionally, medicinal cannabis products that exceed the requisite THC limits per package may continue to be transported and sold until July 1, 2018, so long as the packages contain servings of 10mg or less. These “phase-in provisions have now expired and all products must comply with all formulation, packaging and testing standards as promulgated by the relevant regulatory agencies. The MAUCRSA emergency regulations state that the permitted hours of operation for dispensaries are 6:00 a.m. to 10:00 p.m. However, the hours of operation prescribed by the local jurisdiction may be more restrictive (i.e. requiring businesses to open later and close sooner), but municipalities cannot extend the hours of operation before 6:00 a.m. and after 10:00 p.m. The state application fee for annual retail licenses is $1,000 per license. The annual license fee schedule

for retail licenses set forth in the MAUCRSA emergency regulations are as follows:

Operations ($ Max. Per License)

Fee Per License

Up to $750,000 $4,000 Greater than $750,000 to $2,500,000 $20,000 Greater than 2,500,000 to 7,500,000 $64,000

Greater than $7,500,000 $120,000 In making the determination for what fees will be charged, the licensee or applicant must estimate the maximum dollar value of its planned operations with respect to the value of the product expected to be sold as determined in assessing the state excise taxes. However, a licensee who underestimates their license fee will be assessed a penalty of 50% of the appropriate licensing fee in addition to being required to pay the difference in the appropriate licensing fee. For example a dispensary who estimates their fee will be $36,000 for the year, but actually has operations greater than $4,500,000 will be required to pay an additional $72,000 (.5*72,000 + (72,000 – 36,000)) on top of the $36,000 already paid by the business. Further, a business who overestimates their operations cannot receive a refund for the difference of their licensing fee since all fees are nonrefundable. Delivery Services The MAUCRSA emergency regulations provide for non-storefront retail operations (a.k.a. delivery) subject to certain limitations. Primarily, delivery services are required to have a licensed physical premise that is not open to the public and are required to have local authorization from the municipality in which their premises are located. Local jurisdictions may not ban delivery services from driving through their jurisdiction under MAUCRSA, but may restrict deliveries from occurring within their jurisdiction. The delivery operations must comply with the same requirements for the retailer license except that the premises cannot be open to the public. Other regulations state that deliveries must end at a physical address and be made directly to the customer (no P.O. Boxes), the delivery cannot leave California, and no deliveries shall occur on publicly owned land or buildings. Further, each delivery vehicle must be fitted with a dedicated GPS and alarm system, and each delivery vehicle cannot carry more than $3,000 of cannabis and cannabis products at one time.All deliveries must be made by a licensed delivery employee over the age of 21. Customers are required to receive a copy of their delivery request and receipt. Hours of delivery are the same as dispensary hours, 6:00 a.m. to 10:00 p.m. Delivery services may not be delegated to an independent contractor or be made by unmanned vehicle. Consumption of cannabis is prohibited by delivery drivers while conducting a delivery. The application fee for delivery businesses is $1,000, and the annual licensing fees are the same as storefront retail operations listed above. Cannabis Event Organizer The annual cannabis event organizer license is required for any licensee who organizes public events where cannabis will be sold and/or consumed. In addition to the annual event organizer license, each event must be authorized by the Bureau through a temporary cannabis event license. Cannabis events may only occur on state or county fairgrounds and may not exceed 4 days. Applications for the temporary event license must be received by the Bureau no less than 60 days before the event is scheduled to take place. Any sales that take place at the cannabis events must be conducted by retail licensees or microbusiness licensees authorized to sell cannabis. If an event organizer also holds a separate retail license, then the event organizer may also sell cannabis at the event. Consumption areas

at temporary cannabis events shall only be accessible to persons 21 or older, and no alcohol or tobacco consumption is allowed on the premises designated for consumption. Further limiting the viability of cannabis events is the requirement that the cannabis event comply with all local cannabis rules. Thus, a cannabis event cannot occur at county or state fairgrounds unless the local jurisdiction in which those fairgrounds sit permits the sale and on-site consumption of cannabis. The application fee for an annual event organizer license is $1,000 per application. Further, each individual temporary event license application will cost $1,000. The annual license fee for a cannabis event organizer license is $5,000 for event organizers who conduct 1-10 events annually, and $10,000 for event organizers who conduct more than ten events annually. Cultivation licenses Cultivation licenses are required in order to plant, grow, harvest, dry, cure, grade, or trim cannabis. A licensee may hold any number of cultivation licenses, with no cap on the amount of canopy each licensee may cultivate in the aggregate. Though the MAUCRSA emergency regulations do not contain an aggregate cap on the total size of the canopy one licensee may cultivate, several groups are actively lobbying, with success, for the inclusion of an aggregate cap per licensee that ranges between a maximum of 1 to 4 acres. A nursery license is a distinct type of cultivation license that allows a licensee to produce only clones, immature plants, seeds, and other agricultural products used for the planting, propagation, and cultivation of medical cannabis. Nurseries produce immature plants that can be sold to licensed cultivators and retailers. Nursery licensees can conduct research and development on the premises in designated areas. Nurseries may produce seeds for distribution as well. Some of the more pertinent MAUCRSA emergency regulations include:

a. When calculating cultivation size compliance, the state determines canopy size as measured in square feet of only the flowering plants. That is, non-flowering plants in their seedling or vegetative states do not constitute part of the canopy when determining the size of the cultivation operation. Canopy may be noncontiguous but each unique area included in the total canopy calculation must be separated by an identifiable boundary, such as an interior wall or by at least ten feet of open space. If flowering plants are being cultivated on a shelving system, the surface area of each level will be included in the total canopy calculation.

b. All cultivation facilities must use the track and trace program which will follow the plant and any cannabis product derived from the plant from seed to sale. Cultivation licensees may sell cannabis wholesale to retailers or dispensaries, but not directly to end consumers.

c. As part of the initial application process for a cultivation license, the applicant must provide a lease showing the right to occupy the licensed premises, and a copy of the license, permit, or other authorization issued by the local licensing authority. Also, applicants must submit a certification that the applicant is in, or will be in, compliance with all local ordinances and regulations including the zoning ordinances, building code standards, noise ordinances, and land use plans. Cultivation facilities may not be located within 600 feet of a school unless otherwise permitted by the local jurisdiction. Applicants must have a seller’s permit or be able to show that an application for a Seller’s Permit with the Department of Tax and Fee Administration is pending. Applicants must also post a $5,000 bond, paying for any potential destruction of cannabis in the case of a rules violation. Under MAUCRSA, all cannabis cultivation must all be conducted in accordance with current building and fire stands.

d. There are numerous environmental compliance requirements appearing to be burdensome at

first glance. For example, applicants must comply with water quality protections issued by the Regional Water Quality Control Board or the State Water Resources Control Board and evidence that the applicant has conducted a hazardous materials record search for the proposed premises. If hazardous sites are encountered, the applicant must provide documentation of protocols implemented to protect employee health and safety. Applicants must show their legal access to water rights, by way of groundwater, catchment, riparian rights. Finally, if streambed alteration is required as part of the project, applicants must show a valid California Department of Fish and Wildlife Permit.

e. Applicants operating prior to January 1, 2018 may continue to operate while their application is pending if a completed application is submitted to the Department no later than July 2, 2018.

f. The cultivation application and licensing fees under MAUCRSA are as follows:

Note: Tier 1 mixed light operations are those who use artificial light at a rate of 6 watts per square foot or less. Tier 2 mixed light operations are those who use artificial light at a rate greater than 6 watts per square foot, but at no more than 25 watts per square foot.

Manufacturer licenses

Type Application Licensing

Specialty Cottage Outdoor $135 $1,205

Specialty Cottage Indoor $205 $1,830

Specialty Cottage Mixed-Light Tier 1

$340 $3,035

Specialty Cottage Mixed-Light Tier 2

$580 $5,200

Specialty Outdoor $270 $2,410

Specialty Indoor $2,170 $19,540

Specialty Mixed-Light Tier 1 $655 $5,900

Specialty Mixed-Light Tier 2 $1,125 $10,120 Small Outdoor $535 $4,820

Small Indoor $3,935 $35,410

Small Mixed-Light Tier 1 $1,310 $11,800

Small Mixed-Light Tier 2 $2,250 $20,235 Medium Outdoor $1,555 $13,990

Medium Indoor $8,655 $77,905 Medium Mixed-Light Tier 1 $2,885 $25,970 Medium Mixed-Light Tier 2 $4,945 $44,517

Nursery $520 $4,685 Processor $1,040 $9,370

Manufacturing licenses are intended for extraction of cannabis products through volatile or non-volatile processes, infusion-only operations, or packaging-only operations. “Manufacturing” or “manufacturing operation” means all aspects of the extraction and/or infusion processes, including production, processing, preparing, holding, storing, packaging, compounding of cannabis products, or labeling of cannabis products. The term “manufacture” includes:

a. Extraction processes; b. Infusion processes; c. Packaging or repackaging of manufactured medical cannabis or medical cannabis products; d. Labeling or relabeling the packages of manufactured medical cannabis or e. medical cannabis products;

The term “manufacture” does not include the repacking of medical cannabis products from a bulk container by a distributor or dispensary where the product’s original packaging and labeling is not otherwise altered, or the placing of medical cannabis products into exit packaging by a dispensary. “Volatile solvents” are any solvent that “produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures,” such as butane, hexane, and propane. Non-volatile solvents are any solvent that is not included in the definition of volatile solvents, and include carbon dioxide, food grade butter, olive or coconut oil, and ethanol. A Type-7 Volatile manufacturer may conduct volatile manufacturing, non-volatile manufacturing (so long as their system meets the requisite requirements), infusions, labeling and packaging. A Type-6 Non-volatile manufacturer may only conduct non-volatile manufacturing, infusions, labeling and packaging. A Type-N Infusion licensee may only conduct infusion activities (i.e. using pre-extracted cannabis products to create edibles, capsules, vaporizer cartridges, tinctures or topicals), and packaging and labeling. A Type-P packaging licensee may only conduct packaging and labeling operations. The MAUCRSA emergency regulations include the following rules relevant to manufacturing:

a. For all extractions, licensees must use a closed-loop extraction system with a 99% purity. A licensed engineer must certify that such system was commercially manufactured and built using generally accepted good engineering practices, and is safe for its intended use.

b. Type 6 licenses only allow the use of non-volatile manufacturing processes, while Type 7 licenses allows for either volatile or non-volatile substances.

c. Edible products may have no more than 10 mg of THC per serving and no more than 100 mg of THC per package. For tinctures, capsules, or topicals, products cannot contain more than 1,000 mg of THC per package for adult-use and no more than 2,000 mg. of THC per package for medicinal cannabis products. Manufacturers are required to use manufacturing practices which are substantively similar to the Sherman Food and Drug Act and FDA requirements. Products cannot be infused with nicotine, added caffeine, or alcohol. Products can only be made into non-potentially hazardous foods (e.g. nothing that requires temperature controls, nothing canned, no meat or seafood products, and only shelf-stable products). Licensees cannot manufacture products which require refrigeration below 41 degrees, including any perishable bakery products, products produced with diary (excluding butter) and meat products, or canned products.

d. On top of the statutory requirements (not attractive to individuals under age 21, mandated warning statements, THC content) all final product labels must include: a list of all ingredients in descending order of quantity; the amount of sugar, sodium, and fat per serving; and a cannabis product symbol. Products may not make any claims of health or other physical benefit. Products may not be “attractive to individuals under age 21,” meaning no cartoons, no images popularly

used to advertise to individuals under age 21, and no imitations of candy packaging or labeling. e. There is a one-time license application processing fee of $1,000 for manufacturing. The annual

license fee is based on the gross annual revenue of the licensed premises as follows: • Tier I (gross annual revenue up to $100,000): $2,000 • Tier II (gross annual revenue of $100,001 - $500,000): $7,500 • Tier III (gross annual revenue of $500,001 - $1.5 million): $15,000 • Tier IV (gross annual revenue of over $1.5 million – $3 million): $25,000 • Tier V (gross annual revenue of over $3 million – $5 Million): $35,000 • Tier VI (gross annual revenue of over $5 million – $10 million): $50,000 • Tier VII (gross annual revenue over $10 million): $75,000

The vast majority of local jurisdictions have not authorized manufacturing licenses at this time, especially when it comes to volatile manufacturing. If the local jurisdiction does not provide for a manufacturing license, then applicants will need to seek a new location to operate in 2018 or they will have to continue to operate outside of the fully regulated system only as a non-volatile manufacturer under CUA until the local protections under the CUA expire, which will be one year after the issuance of the first state licenses under MAUCRSA. Distributor licenses Distributors are responsible for inspecting and checking quality on all incoming product to ensure they meet all requisite packaging and labeling requirements as well as arranging for the testing of all cannabis and cannabis products. Additionally, distributors are responsible for collecting all cultivation and excise taxes from other licensees and remitting those taxes to the state. Distributors can also buy products from cultivators, manufacturers, or other distributors and after all required testing is performed, distributors will sell the product to retailers or other distributors. There is no limit on the number of distributor licenses that can be held. Distributor licenses can be held by an individual or company holding any other license category except for a testing license. Among numerous requirements for distributors, some of the more pertinent requirements for distributors in the MAUCRSA emergency regulations are as follows:

• Distributors can store the product they control or provide storage-only services to a cultivator, manufacturer, transporter, or other distributor.

• Testing labs perform random sampling procedures on the product at the distribution site, and then the distributor quarantines the product until it is issued a certificate of analysis and cleared to be shipped to a dispensary. This process must be performed for all products, even if the cultivation or manufacturing and dispensary licenses are held by the same business.

• A distributor license allows for storage of batches of finished product. • Distributors must be insured with a $2 million minimum general liability policy in the aggregate

and a minimum of $1 million per occurrence. • Distributors cannot distribute non-cannabis products or store non-cannabis products on their

premises. • Distributors may package and re-package cannabis, but may not package and re-package edibles

or concentrates There are a total of three separate types of distribution licenses offered by the Bureau. First, there is the full distributor license which allows the licensee to conduct all activities allowed for distributors in the emergency regulations. Second, there is a Transporter Only Self-Distribution license which allows the

licensee to only transport their own product. Lastly, there is a Distributor Transport Only license which allows the licensee to transport other licensees’ cannabis and cannabis products. The annual application fee for all distributor licenses is $1,000. The annual license fee for each type of distribution operation are determined based on the maximum dollar value of the distributors planned operation in assessing the excise taxes. The annual license fees are as follows:

License Type Operations ($ Max. Per License)

Fee Per License

Distributor Up to $3 million $1,200 Greater than $3 million to $12

million $10,000

Greater than $12 million up to $60 million

$50,000

Greater than S80 million up to $120 million

$100,000

Greater than $120 million $200,000 Distributor Transport Only Self-

Distribution Up to $2 million $500

Greater than $2 million to $8 million

$2,000

Distributor Transport Only Up to $2 million $800 Greater than $2 million to $8

million $2,500

Testing Licenses and Testing Requirements Testing of products for various contaminants is mandatory under MAUCRSA and must be conducted by licensed testing labs. Beginning in 2018, California will phase-in the requirements to test cannabis and cannabis products for pesticides, mold, mildew, and other contaminants. MAUCRSA explicitly prohibits the use of banned pesticides and sets standards for certification of organic cannabis. However, the Bureau may allow businesses to sell untested products as long as it is labeled “untested” for a set period of time to prevent delays or interruptions in product availability. The MAUCRSA emergency regulations include the following pertinent provisions:

a. The testing lab rules set protocol for sampling, method validation, quality assurance, and licensing of testing lab personnel. The rules lay out what must go into a testing laboratory’s sampling protocol, training requirements for laboratory agents who will be obtaining samples, and how samples are to be stored. Licensees must obtain ISO 17025 accreditation. The Bureau will conduct proficiency testing, which is a blind testing of a laboratory’s ability to perform analyses.

b. All products sold to consumers must be tested for safety by testing laboratories licensed by the Bureau. Products must be tested for cannabinoids, moisture content, water activity, residual solvents and processing chemicals, pesticides, microbiological impurities, mycotoxins, filth and foreign material, heavy metals, and terpenes. The Bureau is attempting to set exposure limits necessary to ensure that no medical cannabis patient will suffer material impairment of health from exposure to contaminants in medical cannabis goods.

c. All batches of cannabis products are required to be tested prior to distribution to dispensaries. Testing labs will test for and report measurements for the following cannabinoids: THC, THCA, CBD, CBDA, CBG, and CBN. If a cannabis product purports to contain terpenes, the testing labs will test for and report the terpene levels. Testing labs will also test for pesticides and other contaminants such as mold, residual solvents, microbial contaminants, and heavy metals.

d. If a batch fails a test, the batch cannot be retested following a failed test unless it goes through a remediation process and proper disposal of the testing sample. A product that fails testing may be remediated and re-tested up to two times. If the product fails testing after the second remediation attempt the cannabis or cannabis product must be destroyed. Testing lab licensees can conduct testing for private individual patients, but these products cannot be resold or transferred to other licensees and may be cost prohibitive.

Track and trace program and records that businesses must keep Each licensee must be part of the track and trace program, which will include seed to sale tracking. The MAUCRSA emergency regulations explain that the track and trace program will track a product via a unique identifying number for the licensee receiving the product, the transaction date, where the product originated, the quantities and varieties of the products shipped, the estimated times of departure and arrival, the quantities or varieties of products received, and the time of departure and arrival. AUMA added a requirement that the tax information be included. Packaging & Labeling Under MAUCRSA, licensees are required to package cannabis and cannabis products in opaque packaging and identify infused edibles with a created universal symbol. The MAUCRSA emergency regulaitons set out numerous standards for labeling, including: a. Labels must include a list of all pharmacologically active ingredients including THC, CBD, CBN, THCA,

and CBDA and the labels must indicate (i) milligrams of each cannabinoid per serving; (ii) number of servings in the package; and (iii) total milligrams per package.

b. For dried flower, labels must include the net weight of medical cannabis in the package. For edibles, labels must include a warning if nuts or other known allergens are used. Some information must be in bold and capitalized. The following are some examples of required statements that the packaging must include:

Schedule 1 controlled substance;

Keep out of reach of children and animals For medical use only

The intoxicating effects of this product may be delayed by up to two hours This product may impair the ability to drive or operate machinery. Please use extreme caution.

c. A licensee must achieve compliance with all labeling requirements by June 1, 2018. Cannabis and

cannabis products that do not meet the labeling requirements prior to June 1, 2018, may be sold if they are affixed with a sticker containing the appropriate warning statements.

The manufacturing regulations set out the following standards for packaging, including: a. Packaging must protect cannabis from contamination and must be sealed in such a way as to be

obvious of tampering or destruction.

b. Packaging must be child-resistant so that it is difficult for children under five years of age to open pursuant to the Poison Prevention Packaging Act of 1970 Regulation’s “special packaging” section. Any products containing more than one ounce of cannabis must be re-sealable so that it continues to be child-resistant.

c. Packaging cannot mirror any packages used for products that are typically marketed to children (i.e. candies).

In addition, in 1986, California voters approved a measure requiring products that contain carcinogens to be labeled as such. In 2009, cannabis smoke was added to the list of substances known to cause cancer – in spite of the lack of clear science establishing that link. Therefore, if a cannabis product is smokable or contains any chemicals on this list, business licensees must include a Proposition 65 warning, which states “WARNING: This product contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm.” State and local taxation MAUCRSA imposes a 15% excise tax on consumers for all purchases of medical and adult use cannabis. The 15% excise tax is based on the average market price of any retail sale by a cannabis retailer. Retail sales of medical cannabis will be exempt from normal state sales and use tax, which range from 7.5-10%. MAUCRSA also imposes a cultivation tax on all harvest cannabis that enters the commercial market, defined as “cannabis or cannabis product that has completed and complies with all quality assurance, inspection, and testing.” Distributors must obtain a separate permit from the Department of Tax and Fee Administration and must collect and remit all cultivation taxes from the cultivator. Local governments are also empowered to add additional local excise taxes, which normally range from 2-15%. However, local taxes may include more than a simple excise tax. For example, Long Beach and Santa Barbara require additional taxes on cultivation and manufacturing activities. These taxes may be based on square footage, gross annual revenue, a tax or per gram, or other variables determined by local governments. Onsite Consumption Under MAUCRSA’s licensing scheme, medical or adult use licensees may apply for a temporary special event license authorizing on-site consumption at county fairs or district agricultural association event, but only in local jurisdictions that authorize such events. Furthermore, a local jurisdiction may allow on-site consumption at dispensaries or microbusinesses provided the area is restricted to those over 21, consumption is not visible from any public place, and no alcohol or tobacco is allowed on the premise. Environmental Safeguards To minimize environmental harms, such as clear-cutting forests and polluting surface and groundwater, MAUCRSA requires all cultivators to identify their water source and obtain all necessary state and local permits for water usage. The Department of Food and Agriculture is the lead agency for the purposes of California Environmental Quality Act (“CEQA”), although full compliance with CEQA has been delayed until July 1, 2019 under MAUCRSA to give local governments time to permit licensees prior to doing a full CEQA assessment. The state has the authority to limit the issuance of unique identifying tags (required for all legally grown plants) if there are adverse impacts to the environment caused by the cultivation. Furthermore, growing or process cannabis where that activity results in a violation of specified laws relating to the unlawful takings of fish and wildlife is classified as a felony under MAUCRSA.

Advertising Restrictions All advertisements must accurately and legibly identify the licensee responsible for the content. Any advertising or marketing placed in broadcast, cable, radio, print, and digital communications shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older. The licensee’s license number must be displayed on all online advertisements. Advertisements cannot be false or misleading. Home cultivation and primary caregivers A qualified patient growing cannabis solely for personal medical use and is not engaged in commercial activity is not subject to the licensing requirements under MCRSA. No personal cultivation or possession limits are changing from preexisting limits set by municipal code or under the CUA. Primary caregivers who provide cannabis to no more than five specified qualified patients are exempt from the licensing requirement. Temporary licensing during the transition from CUA to MAUCRSA in 2018 The Bureau will be issuing temporary licenses to applicants with prior local approval that will allow applicants to continue operating while their MAUCRSA license application is pending. The temporary licenses will be effective for an initial period of 120 days and can be extended for 90 day periods thereafter if the applicant has submitted its annual application, but has not yet received their annual license. Hurdles for existing operators making the transition from CUA to MAUCRSA There are numerous hurdles for businesses operating under the CUA to transition to a fully regulated model. As noted, currently all “collectives” in California must operate under a non-profit model. Businesses should work with their lawyers to ensure that their transition from a nonprofit entity in 2017 to a for-profit entity in 2018 goes smoothly. This may involve dissolving the mutual benefit nonprofit corporation and incorporating a new limited liability company or corporation, or it may involve merging the nonprofit entity with the new for-profit company. The best course of action must be determined on a case-by-case basis and is highly dependent on local government law. For example, some local governments have requirements that medical cannabis businesses operate in a non-profit manner. Even though state law allows for profit businesses under MAUCRSA, local restrictions would continue to govern what businesses are allowed to do at the local level. Under the collective model, all the patients, growers, caregivers, and other members of the collective may have some claim to ownership of the collective’s assets, depending on the workings of the nonprofit’s bylaws or membership agreements. Bylaws and membership agreements must be amended prior to any transition to a for-profit model to make clear that former members of collectives will not have any legal interest or rights in the assets of the company, such as the license, the equipment, or the intellectual property. Next, ownership or control of the local permit or license under CUA is potentially different in each local jurisdiction. For example, some local laws provide that the nonprofit mutual benefit corporation owns the license and that the license cannot be transferred. In this instance, if the corporation thinking that it can easily transfer the license to the for-profit corporation, it may find that it has lost its license. Similarly, local rules may have placed the license in the hands of one or more individuals. If those individuals refuse to transfer the license to the new for-profit business, then the business may be unable to legally operate.

Finally, in the lead up to full regulation, businesses may be seeking investors or to sell their operation. As noted, no one may sell a nonprofit company. The nonprofit must transfer all of its assets, including the license and intellectual property, to a for-profit entity before it can be sold. Investors will want to avoid investing or loaning money to the nonprofit. If the license and assets are subsequently moved to a for-profit entity and the investor has no right or interest in that for-profit entity, the investor could be in a very weak legal position if there is a dispute as to who owns the license or the assets. It is critical that prospective licensees consult with an experienced attorney to assist with this transition process and have specific, individual needs addressed by a competent legal team.

Site and Building Considerations

It is paramount to consider all factors that will impact a cannabis operation when selecting a facility type and location. Different methodologies, market factors, and levels of automation need to be addressed before any final decisions are made. Operational and financial projections must be aligned with expectations for market product demand, capture, and growth. Failure to anticipate future market developments or incorporate resource efficiency practices will severely impact the operations of a cannabis venture and cost more in the long run When determining the facility size, location, and design, it is important to work with subject matter experts within various fields. These include engineering, architectural, surveying, risk analysis, and construction management firms to ensure that the building and production will meet current and future market demands, security needs, and industry best practices. Consulting subject matter experts can ensure that the facility design is efficient, aesthetically appealing, and technologically advanced. By proactively performing the proper research and understanding how other operators are entering the market, businesses can increase their competitiveness and company viability. Geographic location is arguably the most important variable to consider in the beginning stages of facility design. It is not unusual for specific site conditions and facility types to present technical, logistical, and planning challenges, regarding environmental control, engineering, zoning, permits, and compliance with other local, state, and national building codes. No matter the facility type chosen, a request must be submitted to the local city or county zoning and planning department for a land use compatibility statement. This will authorize or deny the use of the land in the city or county for the proposed facility. To note, when engaging with local municipalities, the use of the building must clearly be identified for cannabis operations for all documentation. It is recommended companies ensure the land use compatibility statement receives final approval from the local zoning ordinance before moving further in the facility model process as to not waste resources on planning an unfeasible facility. The best way to ensure a cultivation site is compliant with all zoning, inspections, and permitting, is to contact the local planning and zoning department or other government agency that deals with zoning and building use. The proposed facility model, which can encompass various model types (e.g., cultivation: a fully enclosed indoor facility, greenhouse facility, or commercial outdoor agricultural operation), will need to be in a secure area. Utilizing qualified cannabis experts can be beneficial in purchasing or leasing an accurately sized plot of land or existing building space that can handle initial and full operating capacity of the proposed facility model. Resource availability and infrastructure considerations are also important for site selection and facility design. Be sure to check with local utility and power companies for pricing and access availability. Utility companies have the authority to charge a premium for businesses that consume large amounts of power, though credits and preferable rates are becoming available for the cannabis industry. Regardless, a dependable supply of energy, a redundant power source, and other utility resources are required to operate sustainable commercial cannabis facilities. While it may be advantageous to build a facility from the ground up to ensure the ideal design for its intended purpose, constructing a new facility may cost significantly more than retrofitting or updating a current building. Additionally, building a ground up facility will take much longer than retrofitting. This is something to strongly consider when developing an operational timeline. It is not uncommon for the state or local municipality to require a short operational window after receiving a license. Depending on that timeline, ground up construction might be completely eliminated as a viable option. Retrofitting an

existing building can be completed much more quickly and frequently cost much less compared to a ground up construction approach. When planning a new facility from the ground up, the timeline will likely require at least nine months from the drawing board to the opening day of operation. On the other hand, identifying an existing building and performing the construction requirements to retrofit the building for full operating capacity can be completed in 90 days or less. This approach provides operators, investors, and other associates the opportunity to begin operations much faster. Whether a facility is new construction or a retrofit on an existing structure, making sure equipment and technology is integrated and works effectively together will help ensure energy is not wasted and systems operate at peak efficiency. A sustainable and reliable energy supply is central to all successful operations regardless of the facility model employed. Energy requirements account for a large portion of the operating costs and are dependent on the site selection, geographic location, plot size, level of technology and equipment employed, as well as the operational structure and design itself. Facilities should employ industry and environmental best practices when designing all aspects of the cultivation facility. In most scenarios, local utility companies will supply electricity at a rate based on the expected or actual total maximum consumption and peak demand; therefore, reducing and minimizing energy consumption should be a top priority during the design and site selection of the facility. To reduce energy consumption, selecting equipment with high efficiency ratings, conducting regular equipment maintenance, and optimizing equipment operations based on actual requirements will make all the difference. Choosing to utilize efficient systems and integrating them into everyday use at the facility can dramatically reduce energy consumption. Utilizing renewable energy sources for producing heat, electricity, and other resource requirements is another viable option for creating long-term success and promoting sustainability best practices. Solar panels and wind turbines are the most commonly utilized methods for generating this type of clean energy. However, collecting solar and wind energy is not viable for all facilities due to model, plot, size, location, and weather system. An adequate water supply is essential for every cannabis cultivation facility and may be acquired from the ground (wells), ponds, lakes, rivers, or local utility services. Water collection systems, on-site storage, and drainage systems should all be considered when determining and designing infrastructure requirements, and will be influenced by the water source, water rights, local weather systems, and regulations on waste water and disposal. Several strategies can be employed to reduce the demand on naturally occurring water supplies such as practicing sustainable irrigation practices, harvesting rainwater, and reusing water. It is recommended that water tests be performed by an independent testing lab or a water quality report be obtained from a commercial water testing facility to identify the chemical, physical, and biological characteristics of the water source. This information will help determine the need for supplemental fertilizers and water treatment systems. Testing and documenting water quality is integral for operating a cultivation facility as it will impact nutrient management and irrigation system maintenance and requirements. Cannabis quantity and quality will vary based on the technology implemented and crop management strategies employed. Embracing advancements in cannabis technology and crop management methodologies can maximize yields while reducing energy consumption, labor, and other resources. Cultivation facilities will vary on the levels of technology utilized. This is dependent on the implementation and sophistication of systems used for production, including HVAC, lighting, irrigation, fertigation, environmental controls, and planting and harvesting equipment. The initial investment and upfront costs of technology for a cannabis cultivation facility will be expensive, however, with cutting-

edge technology set in place, investments will yield higher returns.

Operational Best Practices

Introduction When starting a cannabis business, Denver Relief Consulting recommends the following best practices and industry standards be implemented throughout operations to ensure safe, compliant, and efficient facilities, as well as organizational culture for the benefit of customers, employees, and the communities in which you operate. Our recommended strategy is developed and designed to reflect standard operating procedures (SOPs), best practices, and methodologies that ensure consistency, quality, health and safety is implemented throughout all phases of operations. Below is an overview of our recommended operational policies, procedures, and best practices related to cannabis cultivation, botanical extractions, infused product manufacturing, retail operations, patient management, employment standards and benefits, training, quality assurance, inventory management, security, and more.

Security A fundamental obligation of any regulated cannabis business is to provide safety to its workers, customers, and the surrounding community. In each regulated cannabis facility, operators must implement a combination of design features, technologies, procedures, employee practices, training, and administrative strategies to deter, detect, and delay intrusion and prevent theft or diversion by persons employed by, associated with, or entirely independent of the licensed cannabis operations. Current industry best practices exceed security requirements established by California state regulations, and are comprised of four basic elements: (1) Architectural Security, including, but not limited to: site and building perimeter protection, Crime Prevention Through Environmental Design (“CPTED”), exterior lighting, physical barriers, and secure storage; (2) an Electronic Security System (“ESS”), comprised of an access control system, intrusion alarm system, and closed circuit television (“CCTV”) surveillance system, all equipped with remote monitoring and notification capabilities; (3) Organizational Security, including, but not limited to: policies, procedures, and protocols required of all employees and visitors, background checks, remote monitoring of employees using ESS, and the use of internal and third-party security experts and resources; and (4) Information Technology Security, designed to protect company, employee, and customer information via monitoring systems, strict password requirements, data usage analysis, and prompt incident identification protocols. The following are available SOPs related to security:

1. Access Control 2. Anti-Diversion and Transportation 3. Information Technology (IT) Security 4. Organizational Security 5. Premises Security

Patient and Customer Management

For More Information For additional information related to available operating manuals, standard operating procedures, and training assistance available, please contact Denver Relief Consulting at 303.420.PLAN.

A defining mission of all regulated cannabis businesses in California should be to provide quality, innovative approaches to better care for registered patients and adult-use customers. Successful operators must continuously improve policies and procedures for educating qualified patients, caregivers, and adult-use customers. It is imperative that licensed operators pay special attention to ensuring patients and customers receive the care and knowledge they require for responsible use via robust employee training policies, face-to-face counseling and education, written cannabis education materials, and educational events. Due to the sensitive nature of patient and caregiver relationships with medical dispensary operations, maintaining Health Insurance Portability and Accountability Act (HIPAA) compliance, protecting individually identifiable health information, keeping patient health records up-to-date, and creating a general state of confidentiality and trust are also integral elements of maintaining patient loyalty in the regulated industry. Additionally, the newly established California Marijuana Tax Fund will direct a portion of its revenue to educate youth against substance abuse. By incorporating substance abuse education, identification, and prevention strategies into licensed business models, cannabis businesses can better engage with members of the community to align with their vision for responsible adult consumption. The following are available SOPs related to patient and customer management activities:

1. Patient and Customer Counseling and Education 2. Patient and Customer Management and Confidentiality 3. Substance Abuse Prevention

Product Management Product quality, purity, safety, and security must remain among top concerns for all regulated cannabis businesses. Robust information regarding best practices in inventory control, product management, signage, packaging and labeling, recall and withdrawal, and shipping and receiving are required to maintain a safe and legal cannabis operation. Title 16 C.F.R. 1700 of the Poison Prevention Packaging Act provides federal guidelines for all final cannabis product packaging, which should occur in plain, opaque, tamper-evident, and child resistant packaging to keep products out of the hands of children, pets, or an unauthorized end user. The California Adult Use of Marijuana Act also requires delineation of cannabis products into clearly labeled serving sizes and prohibits advertising or marketing of nonmedical cannabis in a manner that is aimed at minors or is near schools. It is the responsibility of a regulated cannabis business to ensure product requirements are met and all inventory is tracked and traced using the program established by the Adult Use of Marijuana Act and implemented by the California Department of Food and Agriculture’s CalCannabis program. All cannabis must be counted, recorded, and maintained at required intervals and discrepancies must be documented, investigated, and reported to the appropriate authorities under state law. A lack of stringent policies for any of these items will not be tolerated by state regulatory agencies. The state will also require the use of an automatic data processing and point-of-sale system that includes an inventory management module capable of producing reports on all cannabis plants and products in-process, finished, stored, and distributed by licensed facilities. Licensed facility transportation measures must include internal controls, reconciliation of shipping records with receiving records, protocols for reporting discrepancies to the appropriate state department, and procedures for taking corrective action in cases where discrepancies are identified. The following SOPs are available in relation to the various mentioned aspects of product management and more:

1. Inventory Control and Management 2. Packaging and Labeling

3. Recall and Withdrawal 4. Shipping and Receiving

Quality Assurance and Best Practices Operators must ensure there is a strict compliance program implemented throughout the company to guaranteed employee, customer, and stakeholder satisfaction. To emerge at the forefront of the responsible cannabis industry, it is paramount to implement best practices related to process controls, emergency management and response, sampling and testing, current Good Manufacturing Practices, Good Agricultural Practices, Good Handling Practices, and quality control measures in the spirit of federal standards, including OHSA, USDA and the FDA regulations. Safety topics must also be continuously addressed, including quarterly inspections, worker safety and health programs, use and maintenance of Safety Data Sheets, required personal protective equipment, safety training for all employees, hazard communication policies, general safety rules, and facility safety requirements. Both the Office of Manufactured Cannabis Safety and the Bureau of Marijuana Control will oversee these various aspects of manufacturing and testing, while CalCannabis Cultivation Licensing will oversee cultivation activities. For a licensed facility to be successful, all cannabis and manufactured cannabis products must be cultivated, processed, handled, packaged, labeled, stored, and dispensed in a safe and sanitary manner, within consistent environmentally controlled spaces. Maintaining Good Agricultural Practices and current Good Manufacturing Practices will involve implementing multifaceted efforts that ensure cannabis products are safe for human use and consumption. The following SOPs are available in relation to maintaining quality assurance and best practices:

1. Current Good Manufacturing Practices 2. Emergency Management and Response 3. Good Agricultural Practices 4. Hygiene Sanitation and Facility Requirements 5. Production and Process Controls 6. Quality Assurance and Quality Control 7. Sampling and Testing 8. Worker Safety

Waste Management All waste, including waste containing finished cannabis and cannabis products, must be stored, secured, locked, and managed in accordance with California laws and regulations. “Cannabis waste" means any part of the plant that is not usable cannabis, or cannabis that cannot be processed as provided in the regulations. In accordance with applicable non-cannabis waste storage and disposal requirements, the disposal of trash or any other kind of waste on the property of another legal entity or any public place is strictly prohibited. Though it is not typically anticipated that regulated cannabis facilities will produce any hazardous waste, it is important to take responsibility and maintain procedures for the safe usage, storage, and disposal of potential environmental contaminants should they be produced or used at any regulated cannabis facility, including crop inputs including but not limited to fertilizers and pesticides. The following SOPs related to waste management are available:

1. Cannabis Waste Disposal 2. Hazardous Material (HAZMAT) Management 3. Non-Cannabis Waste Disposal 4. Waste Minimization

Retail Dispensary Operations Retail dispensary organizational structure and practices must be designed to facilitate smooth retail operations that are managed by qualified people and documented via comprehensive automatic data processing and point-of-sale system. It must be a goal of any successful cannabis business to provide a model for effective and consistent business management in all aspects of retail dispensary operations, including marketing, advertising, implementing industry best practices, ensuring compliance with California regulations, and exceeding the Bureau of Marijuana Control expectations regarding the retail dispensary experience. Patient education, community integration, protection from diversion, sales and cash management, and accounting guidelines must be implemented to ensure all sales and transactions are carried out in accordance with state laws and regulations. Facility managers, in coordination with the Inventory Manager, should be responsible for sales in their respective unit and proper collection of all sales and excise taxes. The following are available SOPs related to these complex retail dispensing activities:

1. Dispensary Operations 2. Marketing and Advertising 3. Sales, Cash Management, and Accounting

Cultivation and Processing Strict cultivation and processing practices must be implemented to guarantee high quality cannabis flower and infused products to consumers. Considerations for effective operations should include media management, crop applications, integrated pest management, water quality, irrigation, botanical extraction, and product integrity. Due to conservative restrictions on pesticides and disease control applications by the California Department of Pesticide Regulation, it is imperative that implemented procedures promote product purity, maintain media quality, manage beneficial organic matter, reduce pest management, and bolster plant health in a manner that does not contribute to contamination of any crops, media, or water by nutrients, pathogens, heavy metals, or residues from prohibited substances in accordance with the Cannabis Cultivation Waste Discharge Regulatory Program. Botanical extractions based in science are the cornerstone of effective product development in the regulated cannabis market, isolating specific cannabinoids, terpenes, and allowing for their reassembly into products that best suit the needs of patients and customers. Understanding cannabinoid and terpene profiles, ingestion methods, and product types consumers desire is crucial to a successful business in the California cannabis industry. Additionally, packaging and branding selections are of the utmost importance as production quality and product efficiency standards rise across the industry. The following are available SOPs related to cultivation and processing activities:

1. Crop Applications and Pesticides 2. Extraction Methodology 3. Fertilizers, Soil, and Media Management 4. Integrated Pest Management 5. Processing Policies 6. Water Quality and Irrigation

Company Employment All successful regulated cannabis businesses know creating and sustaining successful facilities hinges upon the acquisition and maintenance of high quality, professional employees. Licensed operators must be committed to providing all employees with a safe, healthy, and economically beneficial working

environment in accordance with California Division of Occupational Safety and Health requirements. Fair employment practices, including the prohibition of all forms of illegal discrimination, shall be prioritized and enforced through the licensed operator’s codes of conduct. All employees should receive access to generous benefits packages and rates of compensation that exceed state minimum standards. By providing equal access and fair treatment to all employees, regulated cannabis businesses improve their ability to succeed while enhancing the progress of individuals and the community in which their business operates. Staffing and training procedures must describe all positions that shall be filled in the company’s regulated facilities, provide a complete organizational chart, give detailed job descriptions, describe hiring criteria for each position, provide employee day-to-day schedules, and illustrate all procedures in staffing and training. Strict identification and recordkeeping measures must be addressed, as well as vetting and training requirements for employees, terminable offenses, and other organizational management considerations. Available SOPs related to staffing and training are provided below.

1. Labor and Employment Practices 2. Staffing and Training

Progressive Initiatives – Integrated Pest Management and Organics Integrated Pest Management and Organics

Pesticide use is a double-edged sword. While effective, many cultivators are not familiar enough or educated enough about the effects of pesticides and repellents on both cannabis plants and the end consumer. Failure to respect the potential drawbacks of harsh pesticide use can and has led to tainted harvests and batches hitting the market, or failed regulatory testing that makes products unusable, either way creating a financial burden for businesses. As soon as the Adult Use of Marijuana Act passed in California in 2016, pesticides became a main topic of debate. As an example, 44 medical cannabis products from Los Angeles, Orange, Riverside, and San Bernardino Counties were tested for pesticide levels by an independent lab, and 41 (93%) tested positive at levels that would have rendered them legally unsellable in a regulated state like Colorado or Washington1.

It is paramount that cultivation operations have thorough, standard operating procedures in place to ensure consistent, compliant harvests. Every cultivation facility is susceptible to unforeseen pest and disease damage if prevention and management are ignored. Integrated Pest Management (“IPM”) is a methodical approach of utilizing a series of best practices that incorporates organic and Generally Recognized as Safe (“GRAS”) pesticides, certain synthetics, or both. Implementing an IPM program is useful to prevent pest and disease problems while eliminating or mitigating the potential risks of using harsh chemicals.

Rather than simply eliminating pests as they emerge with caustic pesticides, IPM techniques can be used to achieve desirable results with less risk. IPM utilizes preventative measures to help ensure a pest problem never arises in the first place. By promoting personal hygiene, the use of sterile media and tools, beneficial predators, automated environmental control systems, informed and accurate plant nutrition, and the selection of disease-resistant genotypes, most potential pests can be mitigated or eliminated. Reducing pest and disease outbreak is not achieved by employing one methodology. It requires a holistic approach that includes IPM, manually removing unhealthy plants and leaves, daily monitoring, and preventative control measures that can vary between biological, cultural, mechanical, or chemical2 actions. When necessary, and after all mechanical and process-based efforts have been exhausted, cultivators should opt for organic or GRAS 25(b) pesticides before moving on to more toxic substances. It is recommended cultivators work with a cultivation specialist to develop the infrastructure, standard operating procedures, and methodologies required to create a healthy cultivation operation. Organics is the fastest growing food consumption and lifestyle movement in modern history, boasting double digit growth percentage almost every year since the 1990s3. While organic production is more labor intensive and requires more skill than synthetic farming, the benefits can outweigh the costs. Organic crops can be produced of higher quality in terms of scent, taste, and overall consumer experience. Organic crops are more feasible in greenhouse or outdoor environments due to their ability to build healthy soil. Organic production methods also reduce fertilizer runoff into local waterways and reduce the carbon footprint by mitigating the need for synthetic fertilizer production. As in traditional 1 http://www.nbclosangeles.com/news/local/I-Team-Marijuana-Pot-Pesticide-California-414536763.html

2 http://www2.ipm.ucanr.edu/WhatIsIPM/

3 http://www.huffingtonpost.com/tom-szaky/the-economics-of-organic_b_10971738.html

agricultural markets, cannabis cultivators and retailers can charge a premium for organically and sustainably grown strains. Though cannabis operations cannot obtain USDA certification due to federal regulation of the word and failure to recognize cannabis as a legitimate agricultural crop, other third-party certifications are available. The Organic Cannabis Association (“OCA”) out of Colorado4 and Clean Green out of California5 both offer strict certifications that can be used in marketing and advertising to help build consumer trust and a loyal client base. Use of IPM and organics offer businesses an effective way to operate efficiently and responsibly in terms of environmental stewardship, consumer safety, and a profitable bottom line.

4 https://www.organicca.org/

5 https://www.cleangreencert.org/about-us/

Progressive Initiatives – Underserved Inclusion

As the cannabis industry continues its transition from social movement to corporate juggernaut, it is preposterous and disingenuous to disregard those who have been negatively impacted by the War on Drugs. People of color and the economically marginalized have been disproportionately affected by the criminalization of drugs, which has created barriers to opportunity. These include basic human rights such as employment, housing, and child custody. It is important to remember the “drug war veterans”—people who suffered so we could participate in this groundbreaking industry. The progress made in regulated cannabis over the past decade is not a result of advocates clamoring for entrepreneurial opportunities. Rather, it is the result of making civic leaders and voters aware of the 800,000 people that go to jail every year for simple cannabis possession and by sharing that the vast majority of these people were of color, even though cannabis use rates are the same across races and other demographics. In California alone, there were nearly 500,000 marijuana arrests between 2006 and 2015, with racial disparity evident in the higher arrest rate of black and Latino people compared to white people6. The War on Drugs continues to be a movement that regards drug use and poverty as criminal. Instead of approaching drug use as a criminal issue, the U.S. should be approaching it as a public health issue by using an approach rooted in compassion, accessible education, and self-empowerment.

The core components of undoing these injustices should be based in improving economic opportunity, social justice reform, and patient awareness within communities of color and other underserved populations. Limited license availability and high license fees in many new markets reduce economic opportunity for all, but especially for those in minority and underserved communities. We must strive for a business environment that is open, free, and allows for competition—rewarding those who work hard, engage in innovative practices, and make a positive impact on their communities, not just those with the most financial and political resources. It is crucial that we work to reduce the prison population and ensure all parties have equal access to industry opportunity through ownership and employment. On a patient and consumer level, we need to educate in minority communities on how cannabis can be an effective medicine and safe consumer good when applied responsibly.

Cannabis companies can address these barriers and provide more equitable access to the cannabis market by making inclusivity initiatives a key part of their Community Engagement Plan. One effective tool is implementing a cultural competence training program that focuses on attitudes (cultural awareness and sensitivity), knowledge (multicultural and inclusive approaches), and skills (use of cultural awareness strategies during interactions with minority communities). The training curriculum should be aimed at increasing employee awareness of how cultural and social factors influence the War on Drugs, poverty, and healthcare inequality. Increasing awareness and recognition of these problems is the first step to remedying them. The current administration in Washington, D.C. will not promote that narrative.

Increasing diversity among the workforce can help increase cultural sensitivity and competence as well. In terms of effective treatment outcomes, racial and ethnic similarity between patient and provider has been associated with greater patient participation that results in additional business7. Cannabis companies should honor the multitude of racial, ethnic, and cultural backgrounds in the communities they serve and consider diversity among staff to be an asset. Companies can improve their inclusion of underserved populations by employing a linguistically diverse workforce to provide more options to their customer-base. The goal should be to improve safe access and maximize comfort by providing diverse service options without actively matching patients with employees based on racial, ethnic, or cultural similarities. 6 http://www.drugpolicy.org/sites/default/files/California_Marijuana_Arrest_Report_081816.pdf 7 https://www.ncbi.nlm.nih.gov/books/NBK220354/

Ultimately, the cannabis industry as a whole is better off when employees are highly trained, culturally competent, and inclusive of diverse groups of people. Successful companies will seek policies and operational practices that widen access to medical cannabis for underserved populations and take adult-use cannabis out of the shadows. Cannabis companies should consider joining and actively supporting the Minority Cannabis Business Association (“MCBA”),8 —which seeks to increase diversity and create equal access and economic empowerment for cannabis businesses, their patients, and the communities most affected by the War on Drugs— while encouraging policy-makers and regulators to consider legislative and policy suggestions mindful of the impacts that policies have on marginalized and underserved populations. MCBA’s groundbreaking model legislation was released in 2017 and is already finding a home in communities across America in the rollout of new programs and licensing structures.

As we replace the illicit marijuana market with a new regulated industry, we have a once-in-a-lifetime opportunity to build a business that is fair and accessible and equitable. If we can do that now as we build businesses from scratch, imagine what that means for who our leaders will be in a decade. – Shaleen Title, Partner and Founder THC Staffing Group, Board Member Minority Cannabis Business Association

8 http://www.minoritycannabis.org

Progressive Initiatives – Community Engagement Community Integration and Engagement

Community integration is a key ingredient for successful operations as the growing cannabis industry consolidates and ownership interests enter the hands of profit driven corporations. Business owners are failing to help expand legitimization of legal cannabis through community integration and progressive initiatives and to engage citizens, local communities, and civic leaders in this progressive movement. Certain long-time entrepreneurs and newcomers to the industry understand there is nothing more essential to ensuring the success of legalization than operators wholeheartedly advocating for the broader needs of their communities. By supporting and investing in the communities in which operations exist, the industry gains faithful supporters and show skeptics that regulated cannabis operations are indeed driven by smart and responsible people. Currently, patients and consumers, as well as civic leaders, welcome community-centered business culture, but it is incumbent on all operators to continue to strive toward this culture shift of integrated communities and operational practices that connect localities and are less environmentally burdensome.

When strengthening community connections, exemplary businesses will go beyond typical philanthropy and generating new tax revenue. The cannabis industry should strive to contribute to their communities by investing in to underserved communities, and implementing various progressive initiatives to improve the quality of life and environment for everyone in our areas of operation. =There have been several municipalities in Colorado that originally opted-out of the adult use market begin to overturn bans on retail sales and commercial licensing during the years since legalization9 because of the unequivocal economic and social benefits experienced by municipalities that opted-in where engaged businesses were present. Historically, champions in local districts create positive impacts in neighboring districts10. Though, we have also seen the opposite be true1112 where a lack of local involvement by cannabis businesses leads to negative public perceptions13 and possible legalization rollbacks from policy-makers or regulators14.

It is clear that community engagement is a relevant, critical component of any successful cannabis business and the market in which it operates. A Community Engagement Plan is a set of policies and procedures that responsible cannabis businesses employ to execute and measure their engagement goals and maximize positive impacts. Effective community integration planning is an ongoing process that involves continuously learning, listening, and evolving the goals of the plan to meet the needs of the locality. It is essential for new cannabis businesses to form healthy relationships with members of their communities to mend the public perception of cannabis, maintain responsible operational status, and become rooted as local leaders in the broader business community. When faced with difficult social, political, and financial challenges a cannabis business with strong community support has greater overall fortitude and a higher probability of success. Known Investments and Impacts in Cannabis Business Community Engagement

9 http://www.denverpost.com/2014/09/27/aurora-set-to-roll-with-recreational-marijuana-sales/ 10 http://www.denverpost.com/2016/04/18/denver-city-council-advances-new-marijuana-industry-caps-in-test-vote/ 11 http://losangeles.cbslocal.com/2016/08/07/members-of-watts-community-march-to-protest-illegal-marijuana-dispensary/ 12 http://www.seattletimes.com/seattle-news/marijuana/protesters-march-on-seattles-uncle-ikes-pot-shop/ 13 http://helenair.com/news/politics/article_2238e220-688b-11df-ae22-001cc4c03286.html 14 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiTvaTRvJDSAhUIh1QKHY4jBpYQFggcMAA&url=http%3A%2F%2Fwww.denverpost.com%2F2016%2F04%2F11%2Fdenver-council-deadlocks-on-new-marijuana-industry-caps%2F&usg=AFQjCNFA2IsUaDCSaytCYdXbofcfA_jhmw

Medical outreach & education

● Patient education ● Physician/nurse education

Indigent care ● Provide access and assistance to low-income patients ● Respect privacy

Veteran hiring and service programs

● Employment opportunities ● Discounts

Volunteer service programs

● Providing staff hours ● Sponsorships ● Reward volunteers

Donation programs ● Food, clothing, toy

or hygiene product drives

● Scholarships, charities, etc.

Neighborhood open house and other events ● Pre-opening event ● Ongoing events ● Point of contact for

neighborhood

Participate in & support community organizations

● Neighborhood associations ● Merchant/business associations

Capital investments ● Schools or youth centers ● Blighted public spaces/sidewalks ● Green spaces

Neighborhood quality of life and support services

● Beautification ● Art installations ● Clean up trash/debris

Safety & security audits

● Crime Prevention Through Environmental Design (CPTED) ● Community concerns

Odor mitigation ● Self-audit & monitor ● Complaint procedures ● Inspect, fix & replace systems as needed

Environmental stewardship

● Reduce energy use ● Waste composting & recycling ● Water conservation

Homelessness programs and healthy food access

● Urban farming ● Food banks/drives ● Nutrition education

Access to transportation and connectivity

● Bicycle & Wheelchair repair clinics ● Ride reimbursements

Substance abuse prevention

● Partnerships/referrals ● Staff advisor & training ● Opioid discussion

Local hiring initiatives ● Minority and underserved inclusion ● Employee benefits ● Job training

Industry Success Spotlight

Berkeley Patients Group

www.mybpg.com info@mybpg.com (510) 540 - 6013

2366 San Pablo Ave Berkeley, CA 94702

Berkeley Patients Group (BPG) is the nation's oldest medical cannabis dispensary. Since 1999, BPG has provided access to affordable, lab-tested medicine in an environment that is safe, comfortable, and professional. BPG’s vision for legal integrity, coupled with their mission to provide compassionate care, has made BPG one of California's most reputable dispensaries. BPG operates in full compliance with California's medical cannabis laws and is regarded as a leader in self-regulation and the development of industry best practices. BPG’s mission is to provide high quality, effective, and affordable medical cannabis to their patients. BPG creates and maintains the highest standards of excellence in all that we do. BPG fosters a compassionate community that advances understanding and inspires action. It was this vision and mission that inspired the founders of Denver Relief to open Denver Colorado’s first medical cannabis dispensaries, with a similar philanthropic and community-centered approach to business. BPG’s success over the years has been dependent on the relationships they have fostered within their community. BPG has a robust corporate giving program that focuses on the development of the local community. By keeping the needs of the local community in focus, BPG is able to respond effectively and make an impactful difference in the lives of our patients and neighbors alike. BPG reviews all requests on an ongoing basis and gives priority to those efforts that work to empower, educate, and provide direct services.

Helping Hands is BPG's needs-based care program for our Berkeley members, proudly offered since they opened in 1999. Helping Hands patients are eligible to receive two eighths (7 grams) of cannabis flowers per week. Recipients may choose a combination of indica, sativa, or high-CBD flowers. BPG will begin accepting new applications for the Helping Hands program on May 20, 2017. In addition to providing free medicine and ancillary wellness services to our patients in need, BPG is a regular contributor to a variety of social causes and organizations that work to improve the lives of our patients and the community-at-large. Just a few of the organizations we contribute to:

Women’s Cancer Resource Center

Berkeley Food & Housing Project

Center for Early Intervention on Deafness

Berkeley Ballet Theater

Lighthouse Charter School – Robotics Team

Brown Boi Project

Toys for Tots – Berkeley Police

Students for Sensible Drug Policy

Drug Policy Alliance

Alameda County Food Bank

To Celebrate Life – Breast Cancer Foundation

Berkeley Youth Alternatives

Transgender Law Center

Berkeley Waterside Workshop

Legal Services for Prisoners with Children

Parents 4 Pot – Holiday Toy Drive

Marijuana Policy Project

Marijuana Majority

Berkeley Chamber of Commerce

California Cannabis Industry Association

Americans for Safe Access – Patient Focused

National Cannabis Industry Association

Progressive Initiatives – Social Consumption

Social consumption of cannabis is an important and pressing issue as more states continue to legalize across the country. Local municipalities and jurisdictions are not bypassing social consumption policies until medical programs have been fully legal and operational. Medical programs that have been implemented and in full effect in specific states like Colorado for several years, are still hesitant to allow social consumption..

In Colorado, Amendment 64, “An Act to Regulate Marijuana like Alcohol” was approved by voters in 2012 and fully implemented by January 1, 2014. Language in the constitutional amendment specifies that consumption shall be permitted so long that it is not done “openly and publicly” or in “any way that endangers others.” While such language was intended to ensure limited consumption would be enforceable in public areas such as parks or bus stations, it has instead been interpreted by public officials to prohibit cannabis consumption at any location outside of a private residence. Unfortunately, this interpretation goes far beyond the intent of the legalization initiative and defies the spirit of “regulating marijuana like alcohol.” In states with legal adult use, few venues or establishments have been legally approved to accommodate adult social consumption. These limiting interpretations necessitate policy reform to provide legal and safe access to social settings where adult consumption can take place. Responsibility for advancing social use policy reform is shared by local advocates and industry participants in emerging markets, as public officials will likely continue to resist progressive consumption policies unless faced by public pressure.

In 2016, Denver Relief Consulting and Vicente Sederberg LLC, along with some of the early pioneers behind Amendment 64, took the call to action to pursue a local initiative campaign in Denver, Colorado, by creating the nation’s first-ever voter-approved cannabis consumption pilot program. Known as Initiative 300 (I-300), the Denver initiative complies with state law and requires businesses to obtain support from their neighborhoods, limits consumption area access to adults over the age of 21, and prohibits consumption from being visible outside of the designated areas. The initiative was carefully crafted to address the fact that many landlords prohibit consumption on-site, including public housing authorities, and that 77 million annual tourists visit Colorado with no legal or safe venues to consume cannabis. The campaign’s message was tailored to local voters by focusing on neighborhood support, adequate staff training, recognizing the increased likelihood that tourists will chose edibles instead of other less potent forms of consumption when faced with no legal place to consume, and recognizing the increased prevalence of consumption in inappropriate public places such as parks, sidewalks, and transit stations. I-300 was approved by 53.6 percent of voters in November 2016.

Denver’s pilot program created by I-300 will be implemented in mid-2017 after an advisory committee studies and completes recommendations for the program. Social consumption venues will change the course of history and open new opportunities for the cannabis industry and consumers sometime within the near future. Many other states will consider social consumption policies in the near future as each newly emerging market will eventually have to address this issue15. It is imperative that local advocates and industry participants pursue these policy discussions before public officials come out with misinterpretations or otherwise interfere with progress.16

15 http://www.reviewjournal.com/news/pot-news/public-use-marijuana-be-debated-during-nevada-legislature-session 16 http://www.denverpost.com/2013/10/17/colorado-must-carefully-define-public-consumption-of-marijuana/

Progressive Initiatives – Employee Health and Wellness There is alarming variability in the quantity and quality of safety training workers receive in the cannabis industry. Overall, the majority of workers within the cannabis industry self-report a relative lack of health benefits, job autonomy, and employee support systems compared to other industries leading to an overall sense of well-being. To improve work standards, businesses need to improve health and safety training for their workers, invest in them through non-wage compensation, and provide them with some level of work autonomy and personal support. Benefits to doing this include reduction in injuries and workplace accidents, lowered healthcare costs, increased productivity, improved workplace perception by workers, and decreased time waste. According to Colorado State University's publication "Work and Well-Being in the Colorado Cannabis Industry", workers self-report a number of various physical workplace hazards and concerns that could potentially impact their well-being. When surveyed, workers valued ergonomics, air quality, physical safety, and respiratory safety the most, followed by slip and fall prevention, pesticide safety, lighting system temperature, security from potential robbery, and physical protection from cannabis dust, powder, and mold. To this end, businesses can introduce more thorough health and safety training as detailed below. Health and Safety Training The most direct way to improve environmental and personal health and safety is to provide more consistent, thorough training upon hire. From a sample, 46% of workers from Colorado reported either no health or safety training, or sparse, one-time training. Another 24% reported training that was one-time only at the time of their hiring. Only 14% of responders indicated that their employer provided structured, elaborate, and continuous training17. In addition to increasing training frequency, business owners can create a positive safety climate by improving the content and implementation of their workers' training. Training Content Content involved when training workers can be broken down into two categories: cannabis industry-specific and general health and safety topics. Dependent on facility type, cannabis industry-specific training should include:

1. Handling of pesticides and chemicals, current laws on pesticide use, and proper use of personal protective equipment like masks and gloves.

2. Remedying ergonomic problems associated with hunching, squatting, or standing for extended periods (e.g. when trimming or selling product at point of sale).

3. Reducing loud noise exposure (e.g. loud stereo equipment or personal headphones while trimming plants).

17 Walters, Kevin M., Gwenith G. Fisher, Liliana Tenney, and Kurt Kraiger. Work and Well-Being in the Cannabis Industry.

4. Implementing respiratory protection and personal protective equipment to protect against dermal absorption of cannabinoids or pesticides in lab settings.

5. Preparing procedures for incidents such as robbery or emergency. 6. Developing employee knowledge of policies regarding cannabis use before shifts, while

on the job, and while operating motor vehicles. General health and safety topics covered should include accident investigation, effective communication, identification of potential hazards, injury and illness prevention training, OSHA recordkeeping training, stress management, team building, best practices with customers, conflict management, and break timing. Training Implementation Training workers is a step-by-step task that requires due diligence from managers and supervisors. Before implementing a training plan, businesses should consider the following points before, during, and after training. Before Training

1. Conduct a needs assessment to determine training programs requirements, number of employees that quality for the training program, and content that needs to be covered in the training program.

2. Prepare the learning climate: accommodate schedules, declare mandatory attendance, communicate importance, and encourage supervisors and managers to emphasize importance.

During Training

1. Enable the right mindset: try to boost motivation, engage with employees directly, practice positive reinforcement, and encourage repetitive practice of training topics.

2. Follow appropriate instruction, strategy, and design: give examples of both good and bad behavior, allow workers to provide feedback, encourage self-learning, and emphasize ability to make mistakes without fear of recourse.

3. Use technology appropriately: provide hands-on training with warehouse equipment, computer software, and other tools of the trade.

After Training 1. Encourage workers to apply what they have learned proactively. 2. Encourage supervisors to reflect on training content and how it relates to on-the-

job experiences. 3. Evaluate training programs for potential improvements: evaluate reactions to the

training program, total knowledge attained, changes in work behavior after training, and notable results.

Non-Wage Compensation and Workplace Autonomy

Health and safety training is the most direct way to improve employee well-being. However, businesses are even more likely to have safe, healthy, well-off workers when they provide some or all of the following:

1. Full or partial employee benefits, including health insurance, paid leave, disability, and retirement.

2. Autonomy and job control via task rotation, flexible scheduling, or autonomous work groups.

3. Support for workers, including employee recognition, steady communication from management, and inclusion of workers in decision-making.

Businesses interested in improving the health, safety, training, compensation, and sense of autonomy among their workers should consider utilizing the Colorado Marijuana Occupational Health and Safety Work Group’s publication “Guide to Worker Health and Safety in the Marijuana Industry”, and any similar guidance provided by California labor authorities and the U.S. Department of Labor, Occupational Safety and Health Administration.

Progressive Initiative – Environmental Stewardship and Technology

Cannabis companies should implement green technology and standard operating procedures (SOPs) to reduce their carbon footprint, curtail resource consumption, utilize alternative energies, treat waste-water, recycle runoff, and implement energy efficient (or certified green) technologies and facility standards. Practicing conservation and utilizing efficient technology will soon not only be best practice, but a cost-reducing resource during the inevitable market competition to come. California, specifically, has established itself as a leader in the transition toward renewable energy. The state currently has a mandate in place to provide 50% of the state’s electricity via renewables by 203018. Recently, a bill was introduced that would double down on that effort, setting 2045 as the goal for 100% energy independence and making 2025 the new deadline for 50% independence19. As the cannabis industry faces a new administration seemingly focused on dismantling and reducing existing environmental protections, it is incumbent on business owners to adopt and practice sustainable, green business operations.

Responsible lighting use is one of the most significant environmental challenges facing the cannabis industry. In Colorado, lighting accounts for 38% of total energy output within a cannabis operation20. The difference in efficiency between Light Emitting Diode (LED), Plasma, Fluorescent, Ceramic Metal Halide (CMH), and Double-Ended High Pressure Sodium (DEHPS) lighting can easily save a facility thousands of dollars in energy costs each year and reduce emissions by tens-of-thousands of tons. As a comparison, DEHPS and LED are the most efficient technologies currently used, producing 1.7-1.8 micromoles of light intensity per watt of energy used. Older HPS technology produces approximately 1 micromole per watt, which amounts to a 70-80% difference in efficiency. Any upfront cost associated with LED or DEHPS quickly pays itself off, with significant energy savings coming in the long run. LEDs can also be tiered more easily than other forms of lighting, which leads more efficient production per square foot of facility.

Water conservation will also prove to be an especially important element in California, where many years of drought led Governor Jerry Brown to declare a drought state of emergency in 2014. While 2017 has boasted above average surface water levels and snowpack accumulation, California is not in the clear when it comes to drought21. The depleted groundwater aquifers could take decades to correct, thereby making responsible water consumption imperative for California cannabis operators in the immediate future. Implementing sensor-based micro-pulse irrigation reduces water consumption around 40%-70%22 while also reducing spending on energy, labor, fertilizer, and loss due to disease23. Facilities with zero effluent runoff will have fewer expenditures on wastewater treatment equipment and associated labor. In addition, all facility wastewater from cultivation rooms and dehumidifiers can be collected, filtered, and reconditioned for reapplication into the irrigation system. Any effluent wastewater that cannot be recycled should be sent through a sediment filter (or equivalent) before getting discharged into a sewer. By planning water conservation solutions during the design phase and making an up-front investment in equipment, cannabis businesses can help save money and the environment in the long run.

Plans for scaling up are also an essential part of maintaining environmental stewardship best practices. By having a financial model in place and a five-year plan, operators can scale their business appropriately with fewer pitfalls. Fortunately for cultivators, scaling up by itself lends to more efficient operations. For example, larger rooms usually have better light layouts with less wasted light, as the 18 http://programs.dsireusa.org/system/program/detail/840 19 https://pv-magazine-usa.com/2017/02/21/100-by-2045-renewable-energy-bill-introduced-in-california/ 20 http://www.cannabissustainability.org/wp-content/uploads/2016/11/Energy_Nick-Broderick.pdf 21 https://ca.water.usgs.gov/data/drought/ 22 http://www.cannabissustainability.org/wp-content/uploads/2016/11/Water_Dr-John-Lea-Cox.pdf 23 http://horttech.ashspublications.org/content/23/6/770.full

perimeter of a grow is where light is utilized least efficiently. It also takes longer for larger rooms to have environmental swings in temperature and humidity. Additionally, the buffer from this increased cubic footage allows HVAC equipment to run more efficiently.

To help further address the environmental impact of operational activities and create an eco-friendlier image for the cannabis industry, companies should consider joining and supporting the Resource Innovation Institute (RII)24, which collaborates with the cannabis industry, existing private markets, and the public sector to drive market-based solutions, promote resource efficiency, and guarantee industry sustainability. RII’s objective is to transform the cannabis market toward carbon-free and water-wise production. Businesses should also look to participate in the annual Cannabis Sustainability Symposium to keep current on best practices related to waste management, energy efficiency, design sustainability, new technology, and more25.

24 http://www.resourceinnovationinstitute.org/ 25 http://www.cannabissustainability.org/

Featured Content

What to look for in a cannabis law firm and how to be a good client

Every cannabis business needs dedicated professionals working and advocating on its behalf. Perhaps no professional is as indispensable as a competent, experienced cannabis attorney. Hiring the wrong law firm can lead to serious mistakes or problems. Here are tips on how to hire the right law firm and how to best use your attorney.

Find an Attorney with a Strong Reputation The number of experienced cannabis attorneys is growing, but it remains small. Ask other

cannabis companies who they recommend. Consistent or repeated complaints likely suggest a reoccurring problem. The right attorney should have an overall good reputation for quality work, but an isolated poor review or two is not necessarily indicative of a poor attorney. Some attorneys and clients are bad matches, or sometimes clients blame attorneys for issues entirely beyond the attorney’s control. Be sure to check the state bar association for any history of disciplinary action against the attorney based on malpractice or a violation of the ethical rules.

Hire a law firm with experience in the specific areas of law you are looking for help. Cannabis law encompasses easily over a dozen disciplines, including business startup, business

transactions, intellectual property, real estate, land use, potential securities law issues, potential civil litigation, mergers and acquisitions, and of course cannabis-specific laws and regulations. No one attorney can possibly be an expert in all of these practice areas. For this reason, it is likely important to hire a law firm that has multiple disciplines covered by different lawyers. Small firms of fewer than five lawyers likely cannot handle most of your legal needs.

Be wary of criminal defense attorneys without much business experience. There are numerous criminal defense attorneys attempting to transition to business transaction

attorneys in this field. While over time these lawyers can gain the skill necessary to handle business work, former criminal defense attorneys should have at least 5-7 years’ experience with business law. Recent newcomers are much more likely to make significant mistakes.

Be careful of big firms without any cannabis regulatory experience. Some large firms are beginning to offer representation for the cannabis industry. These firms will

generally be 30% or more expensive than medium and smaller firms. If a large firm does not have significant experience dealing with this highly regulated industry, it may rely on traditional business law practices that do not comply with the nuanced cannabis-specific regulations that are more restrictive than those in other industries. Some big firms are known to put too many attorneys on a matter and overbill clients. Again, find an attorney with significant business experience in the cannabis industry.

Hire your own attorney and get independent advice. Frequently, a group of investors and business owners believe they can all hire one attorney for “the

deal.” However, attorneys cannot ethically represent both sides of the same deal even if the deal is friendly and the business terms have already been agreed upon. In every contract, there will be some provision or angle that will favor one over another. Each party should have its own independent counsel

to ensure it does not surrender important rights in the process. It should be a red flag if a group of investors or business owners tells you that one attorney can represent everyone. Seek independent advice in those situations.

Do not hire the cheapest attorney. The old saying, you get what you pay for, also applies to attorneys. The cheapest attorney is usually

the least experienced, carrying the highest risk of serious mistakes. California attorney rates are generally higher than in other states, commonly between $300 to $700 per hour for an experienced attorney. Attorneys who charge higher rates usually (but not always) do so for good reasons. They are experienced, knowledgeable, and are more efficient with their and their clients’ time. Keep in mind that higher rates do not always mean a larger total bill.

Be a good client. Like any relationship, you get out of your attorney-client relationship what you put into it. If you are

overly demanding, pay your bills late or not at all, or if every issue is a fire drill because you did not call your attorney until the last minute, the relationship will be strained. Strained relationships rarely result in superior results. On the other hand, if you have realistic expectations, respect your attorney’s time, and pay your bills on time, your attorney will recognize you as a prized client and will always be willing to go the extra mile for you.

Have high, but realistic, expectations. A good attorney is more than a legal technician. A good attorney is also a counselor and an

advocate. A good attorney will timely respond to your calls and e-mails. Good attorneys are well-educated, well-trained, and know their way around a legal issue. But the laws in the cannabis industry are constantly changing, so a good attorney will also say: “I don’t know the answer right now. I need to research and consider the issue before giving any advice.”

Do your homework and due diligence on the industry. Good business attorneys know business generally, but they are not business consultants. They can

recommend legal solutions for business goals, but you, not your attorney, need to determine what those goals are. Too often, especially clients who are new to the industry, seek business advice from cannabis attorneys. If you need business advice, talk to people in the industry first, and then find a good attorney.

Read the documents. While you have to trust your attorney, you also need to actually read any document your

attorney drafts for you. If you do not understand any provision or if a provision seems to contradict your deal points, ask your attorney for clarification. Communication between attorneys and clients, like any human relationship, can be imperfect. If you sign a document without reading it, you may end up with something you did not expect or want.

Municipal Overview

The Local Government Guide is a proud accomplishment in the inaugural edition of the California Opportunity report. This section has girth and depth and is meant to provide guidance through your consideration of doing business in existing and emerging local markets. The guide is a never-before released deep dive into important local considerations for cannabis entrepreneurs, investors and industry watchers. Our team has been hard at work compiling key geographic, demographic, and regulatory information to produce this convenient and important guide. The guide is organized geographically into regions, counties and cities. Certain areas, such as Los Angeles, the San Francisco Bay Area, and Northern California, have additional detail because we expect a significant amount of interest in production and retail facilities in these areas. The organization of this section covers all 58 counties, and provides additional information on selected major municipalities, listed in alphabetical order with specific emphasis on potential and promising opportunities. This guide is broken down into three major regions: • Northern; • Central; and • Southern. The municipality and county sections include the following information: • Overview – Region, Sub-region, County, Location detail and special notes on physical, economic,

social and cultural characteristics; • Demographics and voting – Population, median household income, total retail sales and election

results on Propositions 64 and 19; • Summary – Number of existing licenses, presence of current regulatory framework, summary of

local government position on cannabis; • Recent developments – Recent government actions related to cannabis; • Licensing Overview – Description of the current and expected licensing framework (where

available); • Laws and regulations – Links to pertinent regulations, statutes and ordinances, tax policy

information, and land use and zoning requirements; • Recent news – Links to relevant news from late 2016 and the first half 2017; and • Resources – Links and contact information for government, policy and industry resources. Each city and county also includes our four-category ranking system for your quick reference. The authors analyzed every village, town, city and the unincorporated county areas to rank each according to overall potential to establish a successful cannabis business. Our ranking takes into account market size, geographic location, political environment, and regulatory system to provide readers with an unbiased assessment of opportunity. Our opportunity ranking categories include:

• Promising opportunity – A promising opportunity currently allows commercial cannabis businesses to obtain licenses and operate within city or county limits and has permissive tax and land use policy.

• Potential opportunity – A potential opportunity is currently defining its regulations and looks promising, or currently allows commercial cannabis businesses with slightly less permissive regulations.

• Limited opportunity – A limited opportunity currently allows or plans to allow commercial cannabis businesses, but only under strict regulation and a limited number of licenses.

• Challenging opportunity – A challenging opportunity has a current moratorium or a ban on commercial cannabis businesses.

We hope this section is useful as you begin to scout for opportunities in the California market. Stay tuned for our next update, which will be available in December 2017. The update will include a complete refresh of the local government guide including all municipal and county regulatory and licensing information.

Municipal Overview – Northern Region

Alameda County

PROMISING OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

Communities: Oakland, Alameda, Albany, Berkeley, Dublin, Emeryville, Fremont, Hayward, Livermore, Newark, Piedmont, Pleasanton, San Leandro, Union City

Location: Alameda County is located in the Bay Area in northern California, and is the 7th most populous county in the state. Alameda County occupies the eastern side of the bay area. Alameda County has 821 square miles of total area.

U.S. Census Bureau Statistics

Population: 1,638,215 (2015)

Median Household Income: $75,619 (2015)

Total Retail Sales: $20,901,014,000 (2012)

Election History

Prop. 64 Results – Y: 393,004 (66.4%) - N: 199,285 (33.6%)

Prop. 19 Results – Y: 257,005 (56.4%) - N: 199,309 (43.6%)

Summary and Recent Developments

Alameda County previously prohibited cultivation, manufacturing and delivery of medical cannabis in all areas of unincorporated Alameda County, and only permitted 3 dispensaries, each in a different geographic region in the unincorporated areas of the County. However, in fall 2017 the Board of Supervisors approved expanded medical cannabis ordinances, which went into effect on October 12, 2017. Most recently in May 2018, the Board increased the total number of cultivation sites allowed in unincorporated areas of the county from 6 to 10 (with zoning limitations), and to allow for the sale and delivery of recreational cannabis, and other minor changes. Additional updates to the County ordinances are expected to be ongoing in the near future.

Under these new ordinances, up to 5 dispensaries in total may be permitted in unincorporated Alameda County, allowing 3 new dispensaries in addition to the 2 currently operating dispensaries. A ‘Cannabis Delivery Permit’ can be issued to a “brick and mortar” dispensary holding a valid license issued by a California City or County. Furthermore, up to 10 cultivation sites in total may be licensed in unincorporated Alameda County as part of a pilot program. Beginning in October 2017, the County began the process of soliciting applications and is will soon open up licensing for the recently approved additional cultivation sites to qualifying applicants.

In addition, 15 municipalities within the County have adopted their own approvals and regulations for either or both medical cannabis and adult use businesses. Notably: Berkeley, Emeryville, Hayward and Oakland. Overall, because of the policies in the local cities and communities, Alameda County is expected to become a regional hub for cannabis related business and is recognized as a promising opportunity area in this report.

History

2018

On May 8, 2018 the County adopted ordinance amendments to allow permitted cannabis cultivation operations in the unincorporated area to grow both medical and adult use cannabis and permitted retail operations to sell both medical and adult use cannabis. These ordinance amendments went into effect on June 7, 2018.

2017

In 2017, the Alameda County Ordinance Code was updated to allow permits for commercial medical cannabis cultivation, retail and delivery operations in the unincorporated area of Alameda County. This update included revisions to the County's existing ordinance regulating retail operations (Chapter 6.108), the addition of a new cultivation ordinance (Chapter 6.106), and revisions to the Zoning Ordinance (Title 17).

2016

Alameda County approved regulations for medical cannabis dispensaries in unincorporated Alameda County in March 2016, and the Board of Supervisors have since pursued studies and discussions about increasing the number of permitted dispensaries, as well as allowing and regulating adult use sales by January 2018.

Changes to the medical cannabis regulations included:

• Increasing the total number of dispensaries allowed from 3 to 6, subject to zoning restrictions. • Providing (for the first time) up to 6 commercial cultivation permits, and recently expanding to

10, which must be located in the county’s A (Agricultural) District of East County. Certain permits are designated specifically for indoor cultivation operations and mixed-light operations.

• Creating a two-step process required for any new applications: an RFP (Request for Proposal) process in accordance with Chapter 6 of the County code, and a CUP (Conditional Use Permit), in accordance with Chapter 17 of the County code.

Extra Notes

County planning committees continue to consider changes to current cannabis regulations, and potential policies to align Alameda County with new statewide regulations.

It is anticipated that existing dispensary operators in the County, provided they are in “good standing”, may proceed through the RFP process for a cultivation site more expediently than an applicant without any history of operating an approved medical cannabis business. For prospective applicants without an existing dispensary permit, the RFP process (Chapter 6) may require several months to complete.

Laws and Regulations

Chapter 6.106: Cultivation (PDF)

Title 17 (Zoning): Cultivation (PDF)

Chapter 6.108: Retail Sale (PDF)

Title 17 (Zoning): Retail Sale (PDF)

Land Use and Zoning Requirements

Title 6, Chapter 6.108, Section .030 (E) Each marijuana dispensary shall also meet all of the following locational standards:

(1) No dispensary may be closer to one thousand (1,000) feet from any other dispensary. (2) No dispensary may be closer than one thousand (1,000) feet from any school, public park or playground, drug recovery facility or recreation center. (3) Each dispensary shall be located in a commercial or industrial zone or their equivalent.”

Local Taxes

The current state and local sales tax rate effective in unincorporated Alameda County is 9.5%, which applies to the total purchase amount for patients, per transaction at licensed medical marijuana dispensaries. Resources

County licensing authorities provide the following information regarding commercial cannabis regulation in unincorporated Alameda County:

Cannabis Cultivation, Retail, and Delivery

Requests for Proposals (RFP's) - Cultivation and Retail Permits

Additional Business Types

Commercial Cannabis Taxation

Contact

Liz McElligott

Alameda County Planning Department

224 West Winton Avenue, Suite 111

Hayward, CA 94544

Phone: (510) 670-5400

Email

Berkeley, California

POTENTIAL OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

County: Alameda

Location: Berkeley is on the east shore of the San Francisco Bay in northern Alameda County. Berkeley borders the cities of Oakland and Emeryville to the south, and Albany and the unincorporated community of Kensington to the north. Berkeley has a total of 10.5 square miles of total land area.

Special Notes: Berkeley is home to the oldest campus in the University of California system, the University of California, Berkeley, and many other world-class academic and religious institutions and cultural landmarks. Berkeley is also one of the most politically liberal cities in the United States.

U.S. Census Bureau Statistics

Population: 120,972 (2015)

Median Household Income: $66,237 (2015)

Total Retail Sales: $1,340,992,000 (2012)

Summary:

Berkeley remains a top potential jurisdiction for cannabis industry opportunities. Berkeley currently permits both indoor and outdoor home grows; and commercial licensing for testing laboratories, retail sales, and manufacturing for both medical and adult-use cannabis. Currently no commercial cultivation is permitted.

City Council adopted an adult-use ordinance on October 17, 2017 which went into effect on November 16, 2017. The new ordinance requires City Council approval of zoning regulations, a licensing process, and standards for adult-use cannabis businesses. Shortly after in December 2017, Council officially permitted existing licensed medical businesses to expand into the state adult-use system (Ordinance Number 7,852-N.S.)

On October 3, 2017, the Berkeley City Council amended the ordinance with the following language: Subsection A - notwithstanding sec. 12.26.035, medical cannabis dispensaries authorized under 12.26.130 may conduct adult use cannabis sales if they meet following requirements: Comply with all requirements set forth in sec. 12.26 and 12.27; obtain (temporary) state licenses for both medical and commercial sales, and obtain a City of Berkeley temporary license. Temporary adult use licenses are valid until city of Berkeley creates regulations in compliance with state law. This amendment will allow the 6 existing dispensaries in Berkeley to conduct adult use cannabis sales in January if they meet the requirements.

History

Berkeley has a longtime history of supporting medical cannabis in the Bay Area, similar to its neighboring community in Oakland, further making the east bay area a hotbed for cannabis culture, advocacy and business. The city has historically prohibited commercial cannabis cultivation until recently, and the city’s medical cannabis commission is continuing to study and consider manufacturing and other licensing options. The city allows a limited number dispensaries and essentially an unlimited number of non-profit collectives. As of January 1, 2012, the three existing dispensaries were “grandfathered” in upon compliance with the medical cannabis ordinance, and the city has since approved 6 dispensaries total.

The Berkeley City Council passed several ordinances at the February 14, 2017 meeting to amend the medical cannabis regulations regarding definitions, requirements for dispensaries and collectives, and requirements for new cultivation facilities. Ordinance Number 7,529-N.S. defers to a future Berkeley Zoning Ordinance to limit the maximum number of cultivation sites to six locations in order for the licensing and regulations to become effective.

The Medical Cannabis Commission (MCC) has studied several cannabis business licensing schemes and other cannabis policy topics and drafted recommendations for consideration by the City Council. Several ordinances facilitated by the MCC passed in early 2017 and amended the Berkeley city code, adding Chapters 12.23, 12.25, and 12.28 and amended current sections 12.24, 12.26 and 12.27. One new recent change to the medical cannabis code is a new provision, “Energy Use,” which requires cost-effective water and energy efficiency measures, mitigation of carbon dioxide emissions of electrical energy, and offsets to carbon content of electrical energy for businesses that use natural gas.

The Berkeley City Council is also expected to implement a version of Section 23E.72.040 of the County Code that allows for more cultivation sites in the city, especially smaller ones (i.e. less than 5000 square feet). This comes in the form of a square footage quota, which would cap total city-wide grow space to 180,000 square feet without placing any quota on the number of sites per se.

In October 2016, the Berkeley City Council passed an ordinance adding language to the municipal code to Chapter 12.26 (Section .035) which states: “No adult-use cannabis use may be approved under this Section until the City Council adopts a licensing process and standards for such uses”. Councilmembers and local advocates were quoted in the local news and indicating the language is only meant to be a placeholder while the local cannabis commission and city officials explore the possibilities of commercial cannabis regulations.

In 1979, Berkeley voters passed the Berkeley Marijuana Initiative II, which made the possession, cultivation, sale and transportation of cannabis the lowest law enforcement priority. The 1979 initiative remained the law in Berkeley until November 4, 2008, when Berkeley voters passed the Patients Access to Medical Cannabis Act of 2008 (Measure JJ), which established the Berkeley Medical Cannabis Commission and added Chapter 12.26 to the Berkeley city code to regulate medical cannabis collectives. Chapter 12.26 initially allowed for three medical cannabis dispensaries. Further amendments to Berkeley’s medical cannabis regulations were passed through Measure T on November 2, 2010. On July 8, 2014, the Berkeley City Council passed new ordinances to regulate medical cannabis dispensaries and collectives operating in the city through Chapter 12.27. The new regulations also approved the selection of a fourth dispensary in Berkeley, which was officially announced on May 10, 2016. At the same time, City Council recommended allowing two additional dispensaries to increase the total number of dispensaries to six.

Laws and Regulations

Berkeley Municipal Code Chapter 12.23

Berkeley Municipal Code Chapter 12.25

Berkeley Municipal Code Chapter 12.26

Berkeley Municipal Code Chapter 12.27

Berkeley Zoning Ordinance Section 23E.16.070.C

Berkeley Zoning Ordinance Section 23E.72.040.C

Bylaws - revised 10-06-2011

Recent News

Berkeleyside 02/14/2018: Berkeley halves business tax on recreational cannabis

Berkeleyside 12/22/2017: Berkeley gears up for Jan. 1, when sales of recreational cannabis become legal

The Daily Californian 10/21/16: Berkeley officials plan ahead with adult-use marijuana on state ballot

Resources Commission Vacancies Commission Roster Business tax information Submittal Form: Medical Cannabis Criteria and Requirements Business License Regulations and Checklist for Medical Cannabis Businesses Buffer maps for schools and parks - reference only - 2012 Report to Council - Cultivation of Medical Cannabis Beyond the M Zone (with estimated business tax from cultivation businesses)

Contact

Berkeley Medical Cannabis Commission

Elizabeth Greene, Medical Cannabis Commission Secretary

(510) 981-7484

EGreene@cityofberkeley.info

http://www.cityofberkeley.info/medicalcannabis

Local Leaders

Berkeley Patients Group

2366 San Pablo Ave, Berkeley, CA 94702

www.mybpg.com

(510) 540-6013

Emeryville, California

POTENTIAL OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

County: Alameda

Location: Emeryville is a small city located in northwest Alameda County, in a corridor between the cities of Berkeley and Oakland, extending to the shore of San Francisco Bay. Emeryville has 1.246 square miles of total land area.

Special Notes: Emeryville is home to Pixar Animation Studios and many major biotech and software companies and corporate headquarters. Emeryville’s proximity to San Francisco, the Bay Bridge, many national parks and tourist attractions, the University of California, Berkeley, and Silicon Valley has been a catalyst for economic growth.

U.S. Census Bureau Statistics

Population: 11,694 (2015)

Median Household Income: $77,806 (2015)

Total Retail Sales: $680,019,000 (2012)

Summary

Emeryville remains a top potential jurisdiction for cannabis industry opportunities. Emeryville currently permits both indoor and outdoor home grows; and commercial licensing for testing laboratories, retail sales, manufacturing and distribution for both medical and adult-use cannabis. Currently no commercial cultivation is permitted.

Emeryville currently permits commercial cannabis activity for both medical and adult-use manufacturing, testing, dispensaries, transportation and delivery. In addition, Emeryville allows limited home cultivation and caregiver delivery as well as lawful delivery from medical cannabis providers from outside of the city. The City Council directed staff in February 2017 to begin issuing requests for proposals for manufacturing and testing, and 1 medical dispensary in the city. The Council stated it was not interested in allowing commercial cultivation at that time.

Recent Developments

The Emeryville City Council adopted ordinance Numbers 17-002 and 17-003 on April 4, 2017, adding Article 28 "Cannabis Related Activities" to Chapter 5. The ordinances will repeal and replace Chapter 28 (Marijuana) of Title 5 of the Municipal Code in its entirety to require an Operator’s Permit for commercial cannabis activity and set forth what personal cannabis activity is allowed as required under the AUMA. The new ordinance establishes regulations governing personal cultivation, manufacturing and sales of cannabis and cannabis products. The purpose of these regulations is to provide criteria for the consideration and approval of personal cultivation and businesses engaged in the manufacturing

and sales of cannabis and cannabis products. The Operator’s Permit, similar to a Cabaret Permit, will be handled by the Police Department, which will look into various operational characteristics such as the applicant’s background and proposed security plan.

On September 5, 2017 the City adopted a resolution to release a Request for Qualifications (RFQ) to cannabis businesses for dispensary/retailer permits.

On March 15, 2016, the City council held a study session about medical cannabis. The City Council provided direction to staff to prepare regulations to allow one dispensary, and set other limits on home growing and caregiver deliveries. In addition, the City Council directed staff to return on April 19, 2016, with an ordinance allowing dispensaries located outside of Emeryville to lawfully deliver medical cannabis to qualified patients in the City, which was passed on May 17 2016.

Land Use and Zoning

A recent proposal would allow manufacturing and processing facilities to be allowed in the same zoning districts as Pharmaceutical Manufacturing, namely the Mixed Use with Non-Residential zones (MUN), and Office/Technology districts. A retail sales facility will need a Major Conditional Use permit (MCU) in the same locations where tobacco shops are allowed, i.e. in the Mixed Use districts.

Laws and Regulations

Emeryville Municipal Code Title 5, Chapter 28. Marijuana

Recent News

East Bay Express 03/16/16: Emeryville to Legalize Medical Marijuana Deliveries, Dispensary, and Labs Resources

Contact

City of Emeryville

Chadrick Smalley

Economic Development Manager

1333 Park Ave

Emeryville, CA 94608

(510) 596-4355

csmalley@emeryville.org

Emeryville Cannabis Business Information

Hayward, California

PROMISING OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

County: Alameda

Location: Hayward is in the East Bay sub-region of the San Francisco Bay Area in Alameda County. Hayward is the sixth largest city in the Bay Area and the third largest in the County. Hayward was ranked as the 37th most populous municipality in California. It is included in the San Francisco-Oakland-Fremont Metropolitan Statistical Area by the US Census. It is located primarily between Castro Valley and Union City, and lies at the eastern terminus of the San Mateo-Hayward Bridge. Hayward has 63.7 square miles of total land area.

U.S. Census Bureau Statistics

Population: 158,289 (2014)

Median Household Income: $65,096 (2015)

Total Retail Sales: $1,765,733,000 (2012)

Summary and Recent Developments

Hayward remains a top potential jurisdiction for cannabis industry opportunities. Hayward currently permits both indoor and outdoor home grows; commercial licensing for cultivation, testing laboratories, retail sales, manufacturing and distribution for both medical and adult-use cannabis. Very few municipalities in the state can claim providing such broad licensing approval.

Over the past several months the City has taken steps to ensure proper and legal implementation of adult and medical cannabis business regulations. The Hayward City Council adopted ordinances 17-13 and 17-15, establishing the rules and procedures for selecting and regulating cannabis businesses as well as the specific land use regulations which dictate where certain types of cannabis businesses may locate within the City limits. Most recently, on March 20, 2018 the Council amended the Cannabis Tax Rate. This ordinance updates the tax ordinance to include education as a permissible use of the cannabis tax. The tax is currently set at a rate of 6%.

Hayward previously prohibited all cannabis businesses but “grandfathered” in one dispensary, the “Garden of Eden” which has been the only legal dispensary operating in the southeast bay area, since the neighboring communities of Fremont, San Ramon, Pleasanton, and Livermore have all banned cannabis businesses as well. Voters in Hayward passed a ballot initiative in the 2016 election to impose a tax on all cannabis sales in the city should the Council move forward to authorize additional dispensaries. In fall 2017, after completing several work session studies, the City passed a new cannabis business permit ordinance aligned with the new state laws, allowing a limit number of cultivation, manufacturing, distribution, delivery, testing and retail dispensary permits to be issued. Under Hayward’s new licensing program, the city reserved discretion to decide the number of permits to be

issued, and by December 2017, the City received over 100 applications within a month of opening the application window.

Article 14 of Chapter 6 of the Hayward Municipal Code charges the City Manager with establishing a process for evaluating and selecting cannabis businesses to operate within the City limits. The City is using a Request for Proposals (RFP) to serve as the mechanism for the City to ensure the selection of the most qualified cannabis businesses.

At this time, the City will allow the following types of cannabis businesses:

• Commercial Cannabis Cultivation • Commercial Cannabis Distribution • Commercial Cannabis Manufacturing • Commercial Cannabis Retail Dispensary (Limited to three establishments citywide) • Commercial Cannabis Delivery • Commercial Cannabis Microbusiness (Type 12) • Cannabis Testing Laboratory

Every commercial cannabis must secure a Commercial Cannabis Permit prior to securing the appropriate land use entitlements.

Applicants may apply for permits for one or more business types (listed above) but must provide separate and complete applications for each desired permit type.

The Hayward City Council conducted a work session to review and discuss a staff report about the impacts of cannabis commerce at the March 21, 2017 meeting. The work session “Medical Cannabis and Adult Use of Marijuana Work Session: Where Do We Go From Here?” included a report from the City Attorney and City Manager, as well as a case study, state and federal policy analysis, an NPR report, and the California League of Cities FAQs.

The voters of Hayward recently passed Measure EE by more than 60% in support, which will impose up to a 15% tax on gross receipts of cannabis sales. The measure was placed on the ballot by City Council to determine the level of support in the city. Separate action is still required by City Council to authorize and regulate cannabis businesses, as well to set the specific tax rates.

Local Taxes

Standard local tax rate: 9.75% - Measure EE caps the gross sales tax rate for all cannabis products at a maximum of 15%. A recent change to the tax rate set the cannabis tax at 6%. Laws and Regulations

Hayward Municipal Code Chapter 2 Government and Administration, Article 15 Recent News

East Bay Times 11/26/2017: Hayward gives wary nod to marijuana businesses

East Bay Times 07/28/16: Hayward, San Leandro marijuana tax proposals on ballot

Resources

Hayward Cannabis Permitting Overview Hayward Cannabis Selection Process Contact

John Stefanski

Office of the City Manager

RE: CCP RFP

City of Hayward

777 B Street

Hayward, CA 94541

John.Stefanski@hayward-ca.gov

Oakland, California

PROMISING OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

County: Alameda

Location: Oakland is the largest city in the East Bay region of the San Francisco Bay Area, the third largest city overall in the San Francisco Bay Area, the eighth largest city in California, and the 45th largest city in the United States. The combined statistical area of the Bay Area region (9 counties) is the second largest in California (after the Greater Los Angeles area), the fifth largest in the United States, and part of the 43rd-largest urban area in the world. Oakland has 55.786 square miles of total land area.

Special Notes: Oakland’s Port of Oakland is the busiest port in the San Francisco Bay Area and all of Northern California, and is the fifth busiest port in the United States. Oakland is one of three cities in the Bay Area home to major U.S. professional sports teams. Oakland has more than 50 distinct neighborhoods. Oakland is one of the most ethnically diverse major cities in the country and was ranked the fourth most diverse city in America. Oakland became a destination for African Americans in the Great Migration during and after World War II. Since the 1960s, Oakland has been known as a center of Northern California's African-American history and communities.

U.S. Census Bureau Statistics

Population: 419,267 (2015)

Median Household Income: $54,618 (2015)

Total Retail Sales: $3,029,069,000 (2012)

Summary and Recent Developments

Oakland remains a top potential jurisdiction for cannabis industry opportunities. Oakland currently permits both indoor and outdoor home grows; commercial licensing for cultivation, testing laboratories, retail sales, manufacturing and distribution for both medical and adult-use cannabis. Very few municipalities in the state can claim providing such broad licensing approval.

Oakland has long been at the forefront of medical cannabis legalization, regulation and cultural acceptance. Oakland has been looked at as a longstanding regional and national leader for medical cannabis policy reform, and the community is expected to continue the trend for the further approval and acceptance. In addition, Oakland is home to many nationally recognized legalization advocates and organizations, including Oaksterdam University and the law office of Robert A. Raich, among many others. Oakland currently allows most medical cannabis business types, including cultivation and manufacturing facilities, patient collectives, dispensaries and delivery services, and the city is quickly moving to improve and expand local regulations to align with new state regulations.

In January 2018, the City conducted its public drawing for four Equity applicants to complete the dispensary permit process.

The Oakland City Council passed amendments to the city’s medical cannabis regulations in March 2017, adding provisions to the ‘equity program’, a provision for on-site consumption, and authorization for up to 8 more permits annually, in addition to other changes in the regulations. The Oakland Cannabis Regulatory Commission is a citizen oversight committee that meets monthly, and will be facilitating future discussions surrounding adult use regulations.

In 2017, the Oakland City Council and the Oakland Cannabis Regulatory Commission enacted new ordinances and regulations to allow for adult use cannabis businesses in 2018. In addition, the city further developed its social equity program to increase ownership and licensing opportunities among populations from communities that were most harmed by the war on drugs, and Oakland is one of the first municipalities in the state to add an “on-site consumption” option for retail dispensaries.

Since August 2016, some members of Oakland City Council in tandem with cannabis industry advocates have been working to implement a public banking system in Oakland to allow safe banking access for cannabis businesses. They have since succeeded in getting the City Administrator to report the need to commission a feasibility study and are now in the process of obtaining city funding for that study.

History

In 2004, the Oakland City Council became one of the first municipalities in California and the United States to approve and regulate medical cannabis dispensaries, upon passage of ordinance number 12585, creating Chapter 5.80 to establish citywide dispensary regulations. Chapter 5.80 was amended multiple times in 2010, 2011, and 2012 and again most recently in spring 2016. The latest amendments in 2016 were the result of a 16 month study process through the Oakland Cannabis Regulatory Commission, which will allow the city to permit up to 8 more dispensaries annually and create an equity program to afford permit eligibility to populations that have been vulnerable to the drug war, in addition to other new requirements and regulations.

On November 2, 2004, the Oakland electorate passed ballot Measure Z, a voter initiative entitled “Oakland Cannabis Regulation and Revenue Ordinance”. The ordinance requires the City of Oakland:

(1) Make investigation, citation and arrest for private adult cannabis offenses the City’s lowest law enforcement priority; (2) Advocate through its lobbyist and City officers for changes in state and other laws to

(a) allow and authorize taxation and regulation of cannabis (marijuana) for adults and eliminate criminal penalties for private, adult cannabis use, (b) grant local control to cities and counties to license and regulate cannabis businesses and collect appropriate fees and taxes, and (c) end the prosecution arrest, investigation and imprisonment for adult private cannabis offenses;

(3) Establish a system to license, tax and regulate cannabis (marijuana) sales if California law is amended to allow and authorize such actions; and (4) Create a committee to oversee the ordinance’s implementation and disbursement of revenue from licensing and taxation of businesses that sell cannabis.

Community Benefits

Oakland is one of the first municipalities in the United States to create an “equity program”, with the intention to afford cannabis business opportunities to Oakland residents and populations that have been vulnerable to the consequences of the drug war and specifically providing access to cannabis business opportunities through an equity program for residents from certain police department districts (beats) and individuals who have been previously incarcerated for cannabis related offenses. In part, Oakland maintains strict residency requirements for all applicants, but requires at least half of all cannabis business permits to be issued to applicants eligible under the equity program.

On-site Consumption

According to Oakland Municipal Code, Title 5, Chapter 5.80 (.025), current medical cannabis dispensaries in good standing, may receive an onsite consumption permit at the discretion of the City Administrator, and following a public hearing.

Local Taxes

The current state and local sales tax rate effective in Oakland is 9.5%, which applies to the total purchase amount for patients, per transaction at licensed medical cannabis dispensaries. In addition, Oakland applies a “Medical Cannabis Business Tax” of 5% of gross receipts.

Land Use and Zoning

Oakland Municipal Code, Title 5, Chapter 5.80, Section .020 (D)(1), states that a proposed dispensary cannot be within 600 feet of a public or private school, and must be located in a commercial or industrial zone.

Laws and Regulations

Oakland Municipal Code Title 5, Chapter 5.80 Medical and Adult-Use Cannabis Dispensary Permits

Oakland Municipal Code Title 5, Chapter 5.81 Medical and Adult-Use Cannabis Cultivation, Manufacturing, and Other Facility Permits

Ordinance Number 13370 (May, 17 2016 Amendments)

Ordinance Number 13371 (May, 17 2016 Amendments)

News

05/16/2018 Leafly: California Co-Working Licenses Could Help Further Equity in Cannabis

05/11/2018 PacificStandard: HOW SOME STATES ARE PLANNING TO COMPENSATE THE COMMUNITIES MOST DEVASTATED BY THE WAR ON DRUGS

12/19/2017 KALW Public Radio: In Oakland, ‘cannabis equity’ juggles social justice and business interests

11/14/2016 NBC Bay Area: Oakland City Leaders Discuss Regulating Adult-use Pot

05/04/2016 East Bay Express: Oakland City Council Approve More Marijuana Dispensaries, Cultivation Farms

Resources

Contact

The City Administrator’s Office

1 Frank H. Ogawa Plaza, 11th Floor, Oakland, CA 94612

Monday-Thursday, 9:30am-12pm and 1:00-3:30pm

(510) 238-3294

cannabisapp@oaklandnet.com

Oakland Cannabis Regulatory Committee

Joe DeVries, Staff Contact

One Frank Ogawa Plaza, 11th Floor

(510) 238-3083

JDeVries@oaklandnet.com

City Administration Cannabis Permits

http://www2.oaklandnet.com/government/o/CityAdministration/OAK064043

Additional Information

Cannabis Permit Application (non-dispensary uses)

Cannabis Permit Process - Step by Step

Dispensary Permit Process & Permitted Dispensaries

Become an Equity Applicant or Incubator

Equity Program Technical Assistance

Temporary State Licensing

Local Leaders

Amanda Reiman, California Policy Manager for Drug Policy Alliance, and member of the Oakland Cannabis Regulatory Committee

www.drugpolicy.org

Steve DeAngelo, Founder and CEO at Harborside Health Center

www.shopharborside.com

Dale Gieringer, Director of California NORML, member of the Oakland Cannabis Regulatory Committee.

www.canorml.org

Robert A. Raich, PC

www.robertraich.com

San Leandro, California

LIMITED OPPORTUNITY

Overview

Region: North

Sub-region: Bay Area

County: Alameda

Location: San Leandro is a suburban city in Alameda County, located on the eastern shore of San Francisco Bay, between Oakland to the northwest and Hayward to the southeast with a large marina presence on the Bay.

Special Notes: San Leandro has long been home to many food-processing operations, and is home to many corporate businesses. San Leandro is home to the Zero Net Energy Center, a 46,000 square foot electrician training facility created by the International Brotherhood of Electrical Workers Local 595 and the Northern California chapter of the National Electrical Contractors Association. The Center provides training and promotes energy efficient construction methods, and operates as a zero-energy building.

U.S. Census Bureau Statistics

Population: 149,392 (2014)

Median Household Income: $54,618 (2015)

Total Retail Sales: $3,029,069,000 (2012)

Summary and Recent Developments

San Leandro remains a limited and restrictive jurisdiction for cannabis industry opportunities. San Leandro currently permits both indoor and outdoor home grows; commercial licensing for testing laboratories and manufacturing facilities for both medical and adult-use cannabis; and retail sales and distribution for only medical cannabis. Currently no commercial licensing is available for cultivation.

San Leandro permits 3 medical cannabis dispensaries within city limits and recently launched a cannabis manufacturing pilot program on August 16, 2017 which is administered by the City Planning Division. The city last year approved a new tax rate for cannabis businesses, and it remains unclear if the city will move to allow and regulate adult use cannabis or expand the commercial cannabis market.

In June 2017, City Council unanimously approved an amendment to Title 4 of the City Code which allows the issuance of 5 conditional use permits for cannabis manufacturing and 5 additional permits for testing labs. City Council also adopted a resolution that amends the City Administrative Code to introduce a pilot program for manufacturing business applications.

The pilot program allows up to five Conditional Use Permit applications to be considered and issued for Cannabis Product Manufacturers. Under the pilot program, up to five applications will be accepted. Once the City has received five applications, no additional applications will be accepted until an application is closed or withdrawn, or if a previously issued Conditional Use Permit lapses or is revoked. The City Council will review the outcome of the pilot program once the five initially permitted Cannabis

Product Manufacturing uses have been established and become operational. The City Council may modify or expand the program if it is successful.

On February 6, 2017, City Council adopted Ordinance 2017-001, which amended the city’s zoning code to align with pre-existing Municipal Code. It also removed a provision that required edible products to be manufactured by members of dispensaries.

The voters of San Leandro recently passed Ballot Measures NN and OO by more than 75% and 65% in support, respectively. Ballot Measure NN imposes ongoing tax of up to 10% on gross receipts of cannabis businesses in the city. Ballot Measure OO imposes an ongoing business license tax of 10% of gross receipts for parking lots, and charge $100 per 1,000 square feet of warehouse and distribution space, applicable to all businesses in the city including cannabis businesses.

On October 17, 2016, the City Council amended the medical cannabis ordinance to increase the number of dispensaries allowed from 2 to 3, and permitted the 3rd dispensary to open in the city, ‘Blum Oakland’, which will begin sales to patients on June 1, 2017. In the past year, the city authorized its first 2 dispensaries to operate, awarding permits to Harborside Health Center (September 2015), and Davis Street Wellness Center (July 2016).

Laws and Regulations

San Leandro Municipal Code Title 4 – Public Welfare, Chapter 4-33 – Medical Cannabis Dispensary Permits. News

East Bay Times 02/08/2018: Blum San Leandro gets OK to open marijuana dispensary, lab and kitchen

East Bay Times 12/13/2017: First mid-Alameda County medical cannabis product maker gets OK

East Bay Times 11/09/2017: San Leandro’s Davis Street Wellness Center gets green light for cannabis dispensary

East Bay Times 06/21/2017: San Leandro mulls plan to OK pot testing, manufacturing businesses

East Bay Times 07/28/16: Hayward, San Leandro marijuana tax proposals on ballot

East Bay Times 11/03/16: San Leandro awards third pot dispensary permit

East Bay Times 10/18/16: Terra Tech Gains Second California Medical Cannabis License in San Leandro

Resources

Contact

City of San Leandro Medical Marijuana Program

835 East 14th Street

San Leandro, CA 94577

citycomments@sanleandro.org

http://www.sanleandro.org/depts/cityhall/medical_marijuana/mm.asp

Alpine County

CHALLENGING OPPORTUNITY

Overview

Region: North

Communities: Markleeville

Location: Alpine County is located on the California-Nevada border in the Sierra Nevada, between Lake Tahoe and Yosemite National Park.

Special Notes: Alpine is the least populous county in California. The county seat is Markleeville, and there are no incorporated cities within the county.

U.S. Census Bureau Statistics

Population: 1,110 (2015)

Median Household Income: $52,917 (2015)

Total Retail Sales: $576,000 (2012)

Election Results

Prop. 64 Results – Y: 349 (61.3%) - N: 220 (38.7%)

Prop. 16 Results – Y: 335 (60.0%) - N: 224 (40.0%)

Summary

Alpine County current prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Alpine County is potentially one of the most restrictive local settings for the cannabis industry, despite its approximately 64% of its 700 local voters voting in favor of Proposition 64.

Recent Developments

On May 3, 2016, the Alpine County Board of Supervisors approved ordinance 1421, and amended chapter 7.04 of the Alpine County Code to prohibit all commercial cannabis license types.

Laws and Regulations

Ordinance 1421

Alpine County Code Chapter 7.04 Medical Marijuana

Resources

Contact

Alpine County Board of Supervisors

PO Box 158

Markleeville, CA 96120

(530) 694-2281

http://www.alpinecountyca.gov/

Amador County

CHALLENGING OPPORTUNITY

Overview

Region: North

Sub-region: Sierra/Gold Country

Communities:

Location: Amador County is directly southeast of Sacramento in the Sierra Nevada mountain range.

Special Notes: Ione is Amador County’s largest city with a population of 4,651. Jackson, Amador’s second most populous city, is the county seat. As the home of California’s gold rush, Amador is a popular tourist destination for historic sites, camping, wineries and ski resorts.

U.S. Census Bureau Statistics

Population: 37,001 (2015)

Median Household Income: $54,171 (2015)

Total Retail Sales: $321,498,000 (2012)

Election Results

Prop. 64 Results – Y: 8,319 (47.6%) - N: 9,164 (52.4%)

Prop. 16 Results – Y: 6,706 (41.1%) - N: 9,576 (58.9%)

Summary

Amador County prohibits all forms of commercial medical cannabis activity under Chapter 19.86.020 of the Amador County Code, adopted on January 26, 2016. In addition, multiple local municipalities have enacted bans further making the area entirely inaccessible for consumers and the cannabis industry.

Recent Developments

On February 28, 2017, the Board of Supervisors met to discuss extending a moratorium on all commercial cannabis activity, including adult use under Proposition 64. On April 11th, 2017, the Board voted to extend this ordinance another ten months and fifteen days.

Laws and Regulations

Amador County Code chapter 19.84 Medical Marijuana Dispensaries Prohibited

Amado County Code chapter 19.86 Medical Marijuana and Related Activities

Resources

Contact

Amador County Board of Supervisors

810 Court St Jackson, CA 95642

(209) 223-6470

http://www.co.amador.ca.us/government/board-of-supervisors

Butte County

LIMITED OPPORTUNITY

Overview

Region: North

Sub-region: Sacramento Valley

Communities: Oroville, Chico

Location: Butte County is in the north-central area of Sacramento Valley, and essentially comprises the Chico Metropolitan Statistical Area.

Special Notes: Butte County lies along the western slope of the Sierra Nevada mountain range, earning it the nickname "Land of Natural Wealth and Beauty". Its unincorporated areas offer a wealth of natural environments, including two National Forests and one National Refuge.

US Census Bureau Statistics

Population: 225,411 (2015)

Median Household Income: $43,444 (2015)

Total Retail Sales: $2,576,900,000 (2012)

Election Results

Prop. 64 Results – Y: 47,013 (52.8%) - N: 42,049 (47.2%)

Prop. 19 Results – Y: 31,969 (42.1%) - N: 43,818 (57.9%)

Summary

Butte County has allowed personal medical cannabis cultivation in unincorporated areas of the County since July 2016, but passed a ban on all commercial cannabis activities on October 10, 2017. Butte County remains one of the most restrictive counties in the state. In addition, multiple local municipalities have enacted bans further making the area entirely inaccessible for consumers and the cannabis industry.

Recent Developments

Aside from regulations for personal and private home cultivation, the County Board of Supervisors has banned all commercial cannabis activities.

The Butte County Board of Supervisors voted 3 to 2 to move forward with an ordinance regulating adult use cannabis cultivation on January 24, 2017 and again for a final vote on March 14, 2017. The Nonmedical Marijuana Ordinance adds Section 34C to the Butte County Code, which is closely modeled after the Code’s existing section on medical cannabis cultivation, 34A. The primary difference between the two ordinances is that Chapter 34C requires adult-use cannabis cultivation to take place indoors only on all parcels less than 5 acres in size, but allows indoor or outdoor cultivation on parcels 5 acres in size

or larger. Since the Board voted to waive the first reading of the Ordinance, it will come back to the Board for final approval but cannot be significantly changed.

The Board approved Ordinance 4107 in July 2016 and amended the County’s restriction on medical cannabis cultivation (Section 34A). The Ordinance allows for limited medical cannabis cultivation to take place in unincorporated areas of the County and put limits on the size of grow operations based on parcel size, residential requirements, setbacks, and other factors. The requirements in this section are the basis of Butte County’s recent adult-use cannabis ordinance.

Laws and Regulations

Butte County Code – Nonmedical Marijuana Ordinance – Chapter 34C

Butte County Code – Medical Cannabis Ordinance – Chapter 34A

News

03/14/17 OrovilleMR: Board of Supervisors restricts adult-use marijuana grows

01/22/17 ChicoER: Supervisors get first look at another set of marijuana growing rules Tuesday

11/08/16 ChicoER: California votes to legalize marijuana; Butte sticks with its rules

Resources

Butte County Development Services

7 County Center Dr.

Oroville, CA 95965

(530) 538-7601

https://www.buttecounty.net/dds/CodeEnforcement/CultivationMedicalMarijuana.aspx

Chico, California

CHALLENGING OPPORTUNITY

Overview

Region: North

Sub-region: Sacramento Valley

County: Butte

Location: Chico is located in the heart of Butte County, making it a cultural and economic center of the area. Paradise and Oroville are the two closest cities in proximity.

Special Notes: Chico is home to California State University, Chico and Bidwell Park, one of the largest municipal parks in the country. It serves as home for Sierra Nevada Brewing, one of the largest craft brewers in the United States.

U.S. Census Bureau Statistics

Population: 90,316 (2015)

Median Household Income: $42,342 (2015)

Total Retail Sales: $1,790,690,000 (2012)

Summary

Chico does not allow permits or licenses to be issued for any type of commercial cannabis activity. Dispensaries and delivery services remain illegal only because they are not specifically permitted by the city’s zoning regulations. There are no scheduled city council meetings to address expanding the ban or allowing other commercial cannabis activities. Council members rejected a proposal to from a special committee to further research issues and outcomes related to medical cannabis.

Recent Developments

The Chico City Council conducted a discussion about the impacts of adult use cannabis and reviewed a staff report. On May 16, 2017, the Council introduced a draft ordinance that would explicitly ban all commercial cannabis activity in the county.

In February 2016, the Chico City Council unanimously rejected an ordinance that would have expressly banned medical cannabis deliveries and dispensaries. One council member suggested the formation of an ad hoc committee to research potential issues and possible outcomes, but the initiative was rejected by a two to five vote.

History

In 2011, Chico repealed an ordinance that authorized permits for two medical cannabis cultivation facilities. Currently, qualified patients and caregivers may cultivate cannabis for personal use outdoors, while indoor cultivation requires a city issued permit.

Laws and Regulations

Chico Municipal Code – Cultivation of Medical Marijuana – Chapter 19.77

Recent News

02/02/16 ChicoER: Chico council rejects ordinance expressly banning medical marijuana deliveries, dispensaries

Oroville, California

CHALLENGING OPPORTUNITY

Overview

Region: North

Sub-region: Sacramento Valley

County: Butte

Location: Oroville is located just south of Chico and about one hour north of Sacramento.

Special Notes: Oroville has undergone significant residential construction in the past five years. Chico is growing into a regional commercial hub, so Oroville has become a destination for those looking to be live near Chico more affordably. Additionally, skyrocketing property values in the San Francisco Bay have cause a migration of families into the area.

U.S. Census Bureau Statistics

Population: 16,260 (2015)

Median Household Income: $36,462 (2015)

Total Retail Sales: $396,007,000 (2012)

Summary

Oroville currently prohibits all commercial cannabis license types within city limits. The series of ordinances that prohibit commercial cannabis activities are codified in the Oroville Municipal Code and are not temporary bans. Although several city council members have expressed their interest in revising the ordinances to allow a limited system of permitting for commercial medical cannabis businesses in the future, city council has not revisited the issue since expanding the ban in 2016.

Recent Developments

Oroville City Council voted to tighten the city’s medical cannabis laws on January 3, 2016, in order to meet the deadline for local jurisdictions to approve their own rules. Two urgency ordinances took effect immediately after passing by a six to one vote (No. 1778 and 1813). The ordinances prohibit medical cannabis dispensaries, deliveries, and all commercial processing within city limits. The ban was extended to adult use cannabis on May 2, 2017.

History

Oroville passed a medical cannabis cultivation ordinance (No. 1799) in 2013 that established a system to regulate and issue permits for qualified patients and caregivers to cultivate medical cannabis for personal use. The ordinance requires all personal medical cannabis cultivation to take place indoors in secured structures and that anyone growing receive a permit from the city. Indoor cultivation must take place within a detached, fully enclosed and secure structure greater than 120 square feet.

Laws and Regulations

Oroville Municipal Code – Medical Marijuana Cultivation – Chapter 17.16.105

Oroville Municipal Code – Marijuana Dispensaries – Chapter 17.08.120

News

ChicoER 01/06/16: Oroville Expands City Marijuana Rules to Bar Processing, Mobile Deliveries

Calaveras County

CHALLENGING OPPORTUNITY

Overview

Region: North

Sub-region: Sacramento Valley

Communities: Angels Camp, San Andreas, Rancho Calaveras, Valley Springs.

Location: Calaveras is the intersection of Gold Country and the Sierra Nevada regions of California.

Special Notes: Calaveras is home to a number of natural attractions. It contains parts of Stanislaus National Forest and is home to Calaveras Big Trees State Park, a preserve of giant sequoia trees.

U.S. Census Bureau Statistics

Population: 44,828 (2015)

Median Household Income: $53,233 (2015)

Total Retail Sales: 252,345,000 (2012)

Election Results

Prop. 64 Results – Y: 10,727 (47.2%) - N: 12,013 (52.8%)

Prop. 19 Results – Y: 8,554 (43.5%) - N: 11,109 (56.5%)

Summary and Recent Developments On February 14, 2017, Calaveras County Board of Supervisors voted to extend an urgency ordinance that prohibits all forms of commercial cannabis activity in unincorporated areas of the county. The measure, was extended through May 3, 2017, the date when a citizen-initiative, Measure B, was set for a vote to permanently ban all commercial cannabis operations.

On March 28, 2017, a judge in the Calaveras County Superior Court ordered the measure be removed from the special election ballots. The court order to delete Measure B from May 2 special election ballots, and cited Elections Code 9124. “The language of Measure B fails to substantially comply with the mandated language of Elections Code 9124 for an ordinance submitted to the voters of the county,” assigned judge Richard D. Meyer wrote in his ruling, “Moreover, the Court finds this is more than a technical semantic shortcoming as the actual language of Measure B is misleading as it infers the measure is seeking voter approval of an action of the Board of Supervisors contrary to the actual context of Measure B, which seeks to have the voters direct the board to take an action”.

In April 2017, the County Commission considered recommendations made by an ad hoc committee, including a recommendation to dissolve the committee and have the full board address cannabis policy, creating a new position of Cannabis Control Coordinator (CCC), who would be tasked with providing a single clear line of facilitation, control, oversight and accountability. As also recommended by the ad hoc committee — namely District 2 Supervisor Jack Garamendi, who supports continued regulation of commercial grows, and District 4 Supervisor Dennis Mills, who seeks a ban — the resolution should

include a reaffirming of board priorities with regard to the county’s cannabis grow policy. Draft language, according to the meeting documents, point committing to “effective and timely implementation” of specific provisions within the county’s urgency cannabis regulatory ordinance, which has been in effect since early last May.

While differing in their views on the local cannabis industry, both Garamendi and Mills emphasized in their report that roughly $2 million — still sitting in county coffers from grower registration fees to cover registration and enforcement costs — needs to be expediently used to process hundreds of cannabis grower permits still in the pipeline as well as to abate an estimated thousand-plus illegal grows.

Laws and Regulations

Title 17, chapter 17.95 Medical Cannabis Cultivation and Commerce Title 17, chapter 17.91 Medical Cannabis Dispensaries Recent News

Calaveras Enterprise 04/13/2017: Supervisors propose cannabis official to oversee program MML News 03/17/2017: Time Change for Calaveras Supervisors’ Special Meeting on Cannabis Calaveras Enterprise 03/16/2017: Committee to study cannabis ordinance born The Union Democrat 03/28/2017: Court rules Measure B must be removed from May 2 ballots CBS Sacramento 1/25/2017: Voters to Decide Future Of Legal Marijuana Cultivation In Calaveras County Resources

Contact

Clerk of the Board of Supervisors

891 Mountain Ranch Road

San Andreas, CA 95249-9709

Board Clerk: (209) 754-6370

http://bos.calaverasgov.us/

Colusa County

CHALLENGING OPPORTUNITY

Overview

Region: North

Sub-region: Sacramento Valley

Communities: Colusa

Location: Colusa County is situated to the northwest of Sacramento in the central valley of California. Colusa (city) is the county seat and the largest city in Colusa County. The county has a total area of 1,156 square miles.

Special Notes: Interstate 5 is the main route that runs north-south through the county to Sacramento to the south.

U.S. Census Bureau Statistics

Population: 21,482 (2015)

Median Household Income: $52,168 (2015)

Total Retail Sales: $ 127,885,000 (2012)

Election Results

Prop. 64 Results – Y: 2,858 (43.7%) - N: 3,675 (56.3%)

Prop. 19 Results – Y: 1,644 (31.7%) - N: 3,530 (56.5%)

Summary and Recent Developments

Colusa County currently prohibits all license types. The Colusa County Board of Supervisors is currently waiting for recommendations from a recently created ad hoc committee before considering revising the County Code to allow commercial cannabis operations. The County’s ban on medical cannabis dispensaries was temporarily enacted by Ordinance No. 731 and subsequently extended by Ordinance No. 732. Voters in Colusa County tend to lean Republican and voted against both Propositions 64 and 16 by wide margins. Colusa County is one of three counties in California that does not offer medical cannabis I.D. cards to its residents.

The Colusa County Board of Supervisors agreed to create an ad hoc committee tasked with making recommendations in relation to revising the County’s current cannabis ordinance at their meeting on December 13, 2016. Issues that the Board took into consideration include legalizing cannabis transport and cultivation, approval of additional excise taxes, and the County’s continued regulations to limit growing operations, dispensaries, and public consumption.

On April 18, 2017, the Board of Supervisors heard the first reading of a proposed Ordinance Of The Colusa County Board Of Supervisors Amending Chapter 11 Of The Colusa County Code “To Permit Limited Marijuana Cultivation (personal cultivation) In Accordance With The Adult Use Of Marijuana Act

(Proposition 64) And To Prohibit Marijuana Dispensaries, Delivery, And Sales In The Unincorporated Areas Of The County”. The Board adopted this ordinance on May 2, 2017.

Laws and Regulations

Colusa County Code – Marijuana Cultivation – Chapter 11 Resources

Contact

Colusa County Board of Supervisors

547 Market Street, Suite 102

Colusa, CA 95932

(530) 458-0508

http://www.countyofcolusa.org/index.aspx?nid=206

Colusa (City), California

LIMITED OPPORTUNITY

Overview

Region: North Sub-region: Sacramento Valley County: Colusa Location: Colusa is located on the bank of the Sacramento River in California’s central valley, west of Yuba City and northwest of Sacramento. Special Notes: Colusa features a historic Chinatown, Carnegie Library building constructed in 1905, and an architecturally noteworthy courthouse built in a classical style, among its historically notable buildings. U.S. Census Bureau Statistics

Population (2015): 5,935 Median Household Income (2015): $47,607 Total Retail Sales (2012): $ 76,121,000 Summary and Recent Developments

On June 6, 2017, Colusa City Council passed Ordinance No. 519, amending the City Zoning Code and Municipal Code to allow cannabis manufacturing facilities in Colusa. Ordinance 519 also establishes a regulatory permit scheme for cannabis cultivation, manufacturing, distribution, testing, and transportation. Colusa City Council took the first step towards licensing and regulating commercial cultivation by passing Resolution 16-50 on December 6, 2016, announcing their intent to initiate a cannabis cultivation and manufacturing zoning ordinance amendment, for one specific ‘campus’ or lot in a designated area. The Colusa Planning Commission will prepare amendments after receiving additional public comment sometime in 2017. City officials considered a proposal from Cultivation Technologies Inc. to build a 10-acre commercial cannabis campus in Colusa, which received support from both City Council and Colusa’s Mayor. In their June 6 meeting, the Council voted unanimously to approve Ordinances 519, 520, and 521 to amend the City Zoning and Municipal Codes to allow cannabis manufacturing and establish a permit system for cultivation, manufacturing, distribution, testing, and transportation. Cultivation Technologies, Inc. will develop an interim manufacturing facility, while Green Leaf Processors will develop a more permanent facility. Laws and Regulations

Colusa City Municipal Code – Medical Marijuana Dispensaries – Chapter 12D, Sec. 32.11 Colusa City Municipal Code – Medical Marijuana Cultivation – Chapter 12E News

The Union 12/09/16: Colusa Consider ‘Commercial Cannabis Campus’ Resources

Contact

Colusa City Council 425 Webster St. Colusa, Ca 95932 www.cityofcolusa.com

Contra Costa County

CHALLENGING OPPORTUNITY Overview

Region: North Sub-region: Bay Area Communities: Antioch, Concord, El Cerrito, Richmond Location: Contra Costa County is located in the northern portion of the East Bay region and is primarily suburban. Concord is the largest city in the county with a population of 122,067 people. The county has a total area of 804 square miles, of which 11% is water. U.S. Census Bureau Statistics

Population: 1,126,745 (2015) Median Household Income: $80,185 (2015) Total Retail Sales: $11,847,866,000 (2012) Election Results

Prop. 64 Results – Y: 252,759 (60.3%) - N: 166,253 (39.7%) Prop. 19 Results – Y: 168,219 (48.8%) - N: 175,795 (51.2%) Summary

County Supervisors decided to continue the prohibition on all commercial cannabis activity through the end of 2017, and they will vote later in the year, on a permanent ban or regulations. Recent Developments

Contra Costa County extended a temporary moratorium on commercial cultivation, manufacturing, and dispensing in all areas of the county (unincorporated included) through the end of 2017, unless explicitly permitted by a municipality within the county. Supervisors directed staff to schedule a workshop before the Council considers long term regulatory options. The Board has considered several proposed ideas at meetings in 2018 however the Board has not made any substantial changes to the local code. Laws and Regulations

Ordinance 2008-05 defines and prohibits dispensaries in all zones in unincorporated areas of the county. Definition of medical cannabis dispensary includes "any facility or location, stationary or mobile, where cannabis is made available, sold, transmitted, given distributed to or otherwise provided." Ordinance 2016-10, adopted March 15, 2016 prohibits commercial cultivation and delivery of medical cannabis. News

East Bay Times 12/20/2016: More time to review short-term marijuana ordinances in Contra Costa County cities Mercury News 12/15/2015: Contra Costa moves to further restrict medical pot

Resources

Contra Costa County Board of Supervisors 651 Pine St. Room 107 Martinez, CA 94553 http://www.co.contra-costa.ca.us/193/Board-of-Supervisors

Richmond, California LIMITED OPPORTUNITY Overview Region: North Sub-region: Bay Area County: Contra Costa County Location: Richmond is located in the eastern region of the San Francisco Bay Area in western Contra Costa County. Richmond borders the cities of San Pablo, Albany, El Cerrito and Pinole in addition to the unincorporated communities of North Richmond, Hasford Heights, Kensington, El Sobrante, Bayview-Montalvin Manor, Tara Hills, and East Richmond Heights, and Red Rock Island. Richmond has 30.1 square miles of total land area. Special Notes: Richmond is the largest city in the United States to elect a Green Party mayor. U.S. Census Bureau Statistics Population: 109,708 (2015) Median Household Income: $55,102 (2015) Total Retail Sales: $1,092,503,000 (2012) Summary

Richmond currently allows for commercial cultivation, manufacturing, testing, distribution/delivery and dispensing, for medical cannabis only, with plans to expand into the adult use markets for each of these categories. Richmond became poised to become a major hub for commercial cannabis cultivation and manufacturing after approving some of the least restrictive regulations in the Bay Area in 2016.

On December 19, 2017, the City Council adopted ordinance to initiate the zoning amendment process of Article 15.04.610.270 pursuant to Section 15.04.814.030 of the Richmond Municipal Code. City staff conducted study sessions and public meetings before City Council in January-February 2018 regarding regulation of adult-use commercial cannabis and updates to Article 15.04.610.270 reflecting MAUCRSA, resulting in the current permitting process.

Amendments made to Richmond’s prohibition ordinance includes allow an unlimited number of cultivators and manufacturers to operate within the city, and permits the three existing dispensaries located within the city to operate their own cultivation facility to supply the dispensary or sell the cannabis wholesale.

History

Richmond City Council met on December 20th, 2016 and produced instructions that direct staff to compare taxes imposed by Richmond and Bay Area Cities on the cultivation, manufacturing and sale of cannabis and cannabis infused products. They also requested research on whether taxes on gross receipts comply with the equal protection clause when a small set of businesses are licensed to engage in all three stages of business: cultivation, manufacturing, and sale. Licensing Overview

Referring to Richmond Municipal Code, Article XV, Chapter 15.04.610.270, when applying for a license,

all medical cannabis businesses must submit the same application detailing the proposed property and business plan. Additionally, dispensaries, manufacturers, and cultivators must submit additional applications depending on their type of business. Dispensaries must submit a security system plan, manufacturers must submit plans for manufacturing safety and fire / building code safety, and both manufacturers and cultivators must submit plans for use of renewable electricity, ventilation, water conservation, wastewater use, and mold prevention. Laws and Regulations

Richmond Municipal Code, Article XV, Chapter 15.04.610.270 Recent News

Mercury News 06/22/2016: Richmond lifts ban on commercial cannabis grows East Bay Express 06/28/2016: City of Richmond Approves Huge Expansion to Medical Cannabis Industry Resources

Contact

Richmond Planning and Zoning Department 450 Civic Center Plaza Richmond, CA 94804 (510) 620-6706 Richmond Police Department Regulatory Unit 1701 Regatta Blvd Richmond, CA 94804 Sergeant Abetkov (510) 620-6706

Del Norte County

POTENTIAL OPPORTUNITY Overview

Region: North Sub-region: Far North Coast Communities: Crescent City, Bertsch-Oceanview, Yurok Reservation - partially Location: Del Norte is a rural area that borders the Pacific Ocean and sits adjacent to the Oregon border. Special Notes: Del Norte is of note for its giant Coast Redwoods, unique plant species, coastal animal species, and historic lighthouses. It is well known as the location of several forest scenes from Star Wars, Return of The Jedi. U.S. Census Bureau Statistics

Population: 27,540 (2016) Median Household Income: 40,847 (2015) Total Retail Sales: 192,759,000 (2012) Election Results

Prop. 64 Results – Y: 3,096 (61.99%) - N: 1,898 (38.01%) Prop. 19 Results – Y: 4,058 (49.8%) - N: 4,083 (50.2%) Summary and Recent Developments

Del Norte County has not amended the county code to address cannabis despite certain discussions in the community. The County Supervisors did recently pass Ordinance Number 2017-005, An interim urgency ordinance of the Del Norte County Board of Supervisors imposing a ban on the commercial cultivation, manufacturing, distribution, laboratory testing and sale of cannabis and cannabis products while the County considers comprehensive local cannabis regulations.

On February 28, 2017, the Board of Supervisors participated in a medical and adult-use cannabis workshop presented by the County Counsel. Del Norte Supervisors took no action other than to provide direction to legal counsel during the nearly two-hour workshop, to look at possible regulatory options. Recent News Del Norte Triplicate 03/07/2017: County discusses legal pot regulations Del Norte Triplicate 03/04/2017: Supervisors consider marijuana regulations Crescent City Times 02/27/2017: Discussion on cannabis at BOS, Tuesday, February 28th Resources

Contact

Board of Supervisors 981 H Street, Suite 200

Crescent City, CA 95531 (707) 464-7204

El Dorado County

CHALLENGING OPPORTUNITY Overview

Region: North Sub-region: Sacramento Valley Communities: Placerville, South Lake Tahoe Location: El Dorado County is a part of the Sacramento-Roseville, Arden-Arcade Statistical Area. Special Notes: El Dorado County is home to Lake Tahoe, the Eldorado National Forest, and Emerald Bay State Park. Most of its unincorporated areas arose over the decades because of El Dorado's significant gold presence. The population of El Dorado County has grown as Greater Sacramento has expanded into the region. In the unique Lake Tahoe area, environmental awareness and environmental protection are important issues among the population. The area is highly popular among winter and water sports enthusiasts from around the world. U.S. Census Bureau Statistics

Population: 184,452 (2015) Median Household Income: $69,584 (2015) Total Retail Sales: 1,597,758,000 (2012) Election Results

Prop. 64 Results – Y: 45,254 (49.6%) - N: 45,926 (50.4%) Prop. 19 Results – Y: 31,245 (40.3%) - N: 46,125 (59.7%) Summary and Recent Developments

El Dorado County currently prohibits all commercial cannabis license types. On January 17, 2017, a special ad hoc medical cannabis advisory committee, in coordination with the Chief Administrative Office, recommended the Board give conceptual approval to amend County Ordinance Code, Chapter 09.02 - Code Enforcement, and Chapter 130.14.260 - Outdoor Medical Marijuana, to focus on civil enforcement procedures for outdoor medical cannabis. Again in January 2018, The County reinstated its prohibition on commercial cannabis activities by passing ordinance Number 5075 Extending Moratorium on Commercial Cannabis Activities. In addition, a local cannabis industry entrepreneur and advocate, Tyler Bass, submitted petition signatures to qualify a cannabis dispensary regulatory ordinance on the November ballot for a vote, which could change the direction the county regarding the cannabis industry and could expand opportunity. Laws and Regulations

Article 9, sec. 130.14.250 Distribution Article 9, sec. 130.14.260 Outdoor medical marijuana

News

05/18/2018 Tahoe Daily Tribune: El Dorado County to ask voters for input on cannabis regulations in November

05/18/2018 Tahoe Daily Tribune: Tahoe Wellness Cooperative exec turns in signatures for cannabis ballot measure

04/13/2017 Tahoe Daily Tribune: Tahoe Regional Young Professionals to host town hall on adult-use marijuana

01/30/2017 Tahoe Daily Tribune: El Dorado supervisors review medical marijuana regs

01/21/2016 The Sacramento Bee: With state deadline looming, cities and counties rush to ban pot cultivation

10/25/2016 YubaNet.com: El Dorado County Board of Supervisors Oppose Proposition 64, Marijuana Legalization Initiative

Resources

Contact

Board of Supervisors 330 Fair Lane Placerville, CA 95667 (530) 621-5390

Municipal Overview - Central Region

Fresno County CHALLENGING OPPORTUNITY Overview Region: Central Sub-region: South Central Valley Communities: Coalinga, Fresno, Huron, San Joaquin, Del Rey, Riverdale Location: Fresno County is located in the center of California. Its county seat, Fresno, is the fifth largest city in the state. US Census Bureau Statistics Population: 979,915 (2015) Median Household Income: $45,233 (2015) Total Retail Sales: $9,117,752,000 (2012) Election Results Prop. 64 Results – Y: 116,037 (46.0%) - N: 136,192 (54.0%) Prop. 19 Results – Y: 77,088 (36.2%) - N: 127,004 (63.8%) Summary Fresno County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Fresno County is potentially one of the most restrictive local settings for the cannabis industry, with the exception of the City of Coalinga which permits commercial cultivation, testing laboratories, manufacturing, distribution and retail sales for both adult-use and medical cannabis businesses.

On January 10, 2017 the Board of Supervisors approved an extension to Interim Urgency Ordinance No. 16-017 through December 5, 2018, which prohibits all commercial cannabis activity. The Board is expected to pass an ongoing moratorium again, by the end of the year.

Laws and Regulations Interim Urgency Ordinance Number 16-017 Recent News The Fresno Bee 12/3/2016: Recreation pot in now legal, but Fresno, Tulare counties look to tighten rules. Resources 2281 Tulare Street, #301, Hall of Records, Fresno, CA 93721-2198 (559) 600-3529 http://www.co.fresno.ca.us/Departments.aspx?id=122

Inyo County PROMISING OPPORTUNITY Overview Region: Central Sub-region: Sierra Nevada Communities: Bishop, Tecopa, Deep Springs, Independence, Shoshone Location: Inyo County is situated on the east side of the Sierra Nevada mountain range and southeast of Yosemite National Park. It contains the largest peak in the contiguous United States, Mount Whitney, and the lowest point in North America, Death Valley's Badwater Basin. Almost half of the county is within Death Valley National Park. US Census Bureau Statistics Population: 18,260 (2015) Median Household Income: $45,955 (2015) Total Retail Sales: $229,032,000 (2012) Election Results Prop. 64 Results – Y: 4,428 (54.9%) - N: 3,637 (45.1%) Prop. 19 Results – Y: 3,168 (45.4%) - N: 3,807 (54.6%) Summary On November 8, 2016, voters of Inyo County approved Measure G, Measure H, and Measure I. The measures allow for commercial medical cannabis activities, commercial adult use cannabis activities, and commercial cannabis business taxes, respectively, but all three measures have undergone supplemental rule-making from the Board of Supervisors and the planning department. In January 2018, The Board passed three ordinances to enact regulations for commercial cannabis activities in the County, including Ordinances 1221, 1222, and 1223, collectively to regulate cultivation licenses, non-volatile manufacturing, volatile manufacturing, testing labs, dispensaries including deliveries, distributors and microbusinesses. The latest developments make Inyo County a new promising opportunity jurisdiction for the cannabis industry. Resources Title 18 Commercial Cannabis Activities (Zoning) Title 18 Expedited Abatement Procedure for Nuisances Caused by Cannabis Cultivation Allowed uses by Zoning Title 5 Commercial Cannabis Business License License Zones Map License allocation by license zone County Cannabis Ordinances Press Release Contact

Board of Supervisors PO Box N Independence, CA 93526 (760) 878-0373 http://www.inyocounty.us/Board_of_Supervisors/ Kern County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: South Central Valley Communities: Bakersfield, California City, Maricopa, Taft, Mojave, Rosedale Location: Kern County covers the southern slope of the Coast Ranges, the southern slope of the Sierra Nevada, into the Mojave Desert. It is home to a number of military installations, including Edwards Air Force Base, China Lake Naval Air Weapons Station, and the Mojave Air and Space Port. US Census Bureau Statistics Population: 884,788 (2015) Median Household Income: $49,026 (2015) Total Retail Sales: $8,640,550,000 (2012) Election Results Prop. 64 Results – Y: 98,657 (45.3%) - N: 119,102 (54.7%) Prop. 19 Results – Y: 60,861 (35.2%) - N: 111,883 (64.8%) Summary Kern County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Kern County remains highly restrictive even after conducting an environmental impact study in 2017 and receiving support from local advocates. California City is the friendliest jurisdiction within the County, allowing only indoor home grows, commercial cultivation, testing laboratories, retail sales, manufacturing and distribution only for medical cannabis. No adult-use cannabis businesses are allowed at this time but that could change in the future as pressure mounts and if the medical program proves a success. No other municipalities in the County allow any other licensing for cannabis businesses.

Laws and Regulations Chapter 5.84 Medical Marijuana Cooperatives or Collectives Chapter 5.85 Medical Marijuana Cultivation Chapter 5.86 Moratorium on Establishment Of new Medical Marijuana Dispensaries Resources Kern County Board of Supervisors 1115 Truxtun Avenue, 5th floor Bakersfield, CA 93301 (661) 868-3601 http://www.co.kern.ca.us/bos/contact.aspx

Kings County CHALLENGING OPPORTUNITY Overview Region: Central Sub-region: South Central Valley Communities: Avenal, Corcoran, Hanford, Lemoore, Lakeside, Lucerne Location: Kings County is bordered on the north by Fresno County, from the east by Tulare County, and from the south by Kern County. It is a relatively small county known primarily for its agricultural production. US Census Bureau Statistics Population: 149,785 (2015) Median Household Income: $46,481 (2015) Total Retail Sales: $1,031,953,000 (2012) Election Results Prop. 64 Results – Y: 13,739 (42.9%) - N: 18,269 (56.1%) Prop. 19 Results – Y: 8,747 (33.1%) - N: 17,669 (66.9%) Summary Kings County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Kings County is potentially one of the most restrictive local settings for the cannabis industry. On October 4, 2016 the County Board adopted an ordinance further regulating and clarifying ban restrictions. The county officials firmly oppose both medical and adult use cannabis businesses.

Recent News The Sentinel 10/4/2016 County supervisors pass marijuana ordinance Laws and Regulations Chapter 14, article V Medical Marijuana Resources http://www.countyofkings.com/services/county-code-of-ordinances

Madera County CHALLENGING OPPORTUNITY Overview Region: Central Sub-region: Sierra Nevada Communities: Chowchilla, Madera, Oakhurst, Yosemite Lakes, Parksdale Location: Madera County is usually included in the Fresno Combined Statistical Area. It contains the eastern San Joaquin Valley and the central Sierra Nevada. It also contains part of Yosemite National Park in its northwest corner. US Census Bureau Statistics Population: 154,697 (2015) Median Household Income: $45,073 (2015) Total Retail Sales: $1,012,856,000 (2012) Election Results Prop. 64 Results – Y: 15,169 (43.8%) - N: 19,498 (56.2%) Prop. 19 Results – Y: 12,329 (36.5%) - N: 21,395 (63.5%) Summary Madera County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Madera County is potentially one of the most restrictive local settings for the cannabis industry. No commercial cannabis activities are permitted in Madera County per Chapter 18.87 of the county code, which was updated in 2017 to include ban adult-use businesses in addition to medical.

Recent News Sierra Star 11/1/2016: What will Madera County do with adult-use marijuana? Resources General County Contact 200 W. 4th Street Madera, CA 93637 (559) 675-7703 http://www.madera-county.com/index.php/boardmain

Mariposa County CHALLENGING OPPORTUNITY Overview Region: Sierra Nevada Sub-region: Sierra / Gold Country Communities: Mariposa, Midpines, Lake Don Pedro, Yosemite Valley Location: Mariposa County is in the western foothills of the Sierra Nevada mountains; the eastern part of the county makes up the middle portion of Yosemite National Park. U.S. Census Bureau Statistics Population: 17,410 (2016) Median Household Income: $47,681 (2015) Total Retail Sales: $102, 452,000 (2012) Election Results Prop. 64 Results – Y: 4,618 (51.35%) - N: 4,375 (48.64%) Prop. 19 Results – Y: 3,674 (45.9%) - N: 4,433 (54.1%) Summary Mariposa County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Mariposa County is potentially one of the most restrictive local settings for the cannabis industry. On March 21, 2017, the Board of Supervisors moved to adopt an Interim Urgency Ordinance Prohibiting cannabis businesses within the county.

Laws and Regulations Interim Urgency Ordinance Mariposa County Marijuana Cultivation Regulations Summary Resources Clerk of the Board 5100 Bullion St. P.O. Box 784 Mariposa, CA 95338 (209) 966-3222

Merced County POTENTIAL OPPORTUNITY Overview Region: Central Sub-region: North Central Valley Communities: Merced, Los Banos, Atwater, Livingston, Delhi, Winton. Location: Merced sits southeast of Santa Clara and north of Fresno. Special Notes: Referred to as the “Gateway to Yosemite”, Merced is a two-hour drive from Yosemite National Park, Monterey Bay and several beaches along the Pacific Ocean. It is well suited to be reached by public transportation. U.S. Census Bureau Statistics Population: 268,672 (2016) Median Household Income: $42,462 (2015) Total Retail Sales: 1,959,473,000 (2012) Election Results Prop. 64 Results – Y: 20,876 (49.3%) - N: 21,448 (50.6%) Prop. 19 Results – 18,178 (38.2%) - N: 29,397 (61.8%) Summary Merced County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. Merced County remains a highly restrictive setting for the cannabis industry, with the exceptions of the Cities of Atwater and Livingston which currently permit commercial cultivation, testing laboratories, manufacturing and distribution for both medical and adult-use cannabis, but prohibits retail sales for both. The City of Merced is an outlier, being one of the friendlier jurisdictions in the entire state, permitting nearly all license types for both medial and adult-use businesses.

Throughout the year of 2017, the Board of Supervisors met to discuss the future of medical and adult use cannabis in Merced County, but by November 2017 the Board voted to pass an ordinance enacting a complete ban on all commercial cannabis activities in the unincorporated areas of the County. Laws and Regulations Title 9 General Health and Safety Resources County Executive Officer/ Clerk of the Board 2222 M St. Merced, CA 95340 (209) 385-7366

Mono County POTENTIAL OPPORTUNITY Overview Region: East Sub-region: Eastern Sierra Communities: Mammoth Lakes. Location: East of the Sierra Nevada, Mono lies between Yosemite National Park and Nevada. Special Notes: June Lake, a large tourist attraction known for fishing and skiing, is located in Mono. U.S. Census Bureau Statistics Population: 13,981 (2016) Median Household Income: $56,944 (2015) Total Retail Sales: 139,784,000 (2012) Election Results Prop. 64 Results – Y: 3,241 (61.6%) - N: 2,014 (38.2%) Prop. 19 Results – Y: 2,512 (56.9%) - N: 1,907 (43.1%) Summary Mono County is a surprising turn around since 2017, being originally one of the most restrictive counties alongside many of its neighboring counties in the Sierra Mountain range. Mono County maintained a ban on all commercial cannabis activity since before the passage of Proposition 64 and until June 2018, when the County Board finally passed Ordinance 10 to lift the ban and enact new regulations. The new ordinance establishes a permitting process for commercial cannabis operations within the unincorporated area of the County and includes application and review requirements, enforcement provisions, public health limitations, and a limit on the number of cannabis operation permits available for cultivation to a total of ten (10) licenses. On November 21, 2017, the Mono County Board of Supervisors (the Board) adopted Ordinance Number 17-15 extending the temporary moratorium prohibiting commercial medical and recreational cannabis activities within the unincorporated area of the County. Upon passage of Ordinance 10 to end the ban, and subsequent Ordinance number 18-04 to enact new regulations. On May 8, 2018, the Board adopted Ordinance Number 18-04 adopting General Plan Amendment 18-01, which included the addition of Chapter 13 to the General Plan relating to land use regulations for local commercial cannabis operations as well as Ordinance Number 18-05 adding Chapter 5.60 to the Mono County Code, which established the non-land use regulations for local commercial cannabis operations. The likely change in spirit on the Board of Supervisors may be the result of ongoing public engagement and education over the course of multiple years, including presentations to the board, a citizen-led committee that provided recommendations and more. The Community Development staff led community meetings to gauge residents’ concerns and desires for regulation. The General Plan Amendment amended Countywide policies and actions, and the land use designations' "Uses Permitted Subject to Use Permit". Laws and Regulations Mono County Code Resources

https://www.monocounty.ca.gov/planning/page/cannabis-regulations Contact

Planning Division Mammoth Lakes Office 437 Old Mammoth Road, Ste 220 (formerly Ste P) PO Box 347 Mammoth Lakes, CA 93546 o. 760-924-1800 f. 760-924-1801 Bridgeport Office Annex 1 74 N. School St. PO Box 8 Bridgeport, CA 93517 o. 760-932-5420 f. 760-932-5431 Board of Supervisors Meeting Room 452 Old Mammoth Road 3rd Floor, Suite 307 93546 Mammoth Lakes, CA http://www.monocounty.ca.gov/bos/event/board-supervisors-94

Monterey County PROMISING OPPORTUNITY Overview Region: Central Sub-region: Central Valley Communities: Del Rey Oaks, Gonzales, King City, Salinas, Soledad, Marina, Seaside, Monterey Location: Monterey County is located on the coast of central California. It borders Monterey Bay and is home to picturesque State Route 1, including Big Sur. It is a popular region for tourism. US Census Bureau Statistics Population: 435,232 (2015) Median Household Income: $58,783 (2015) Total Retail Sales: $4,457,401,000 (2012) Election Results Prop. 64 Results – Y: 61,743 (62.2%) - N: 37,503 (37.8%) Prop. 19 Results – Y: 50,983 (51.5%) - N: 48,066 (48.5%) Summary Monterrey County quickly became a top promising opportunity jurisdiction for cannabis industry opportunities. Monterrey County is by far the most promising county in the central region, with close proximity to bay area counties that are among the most progressive and friendly to the industry statewide. The County currently permits nearly all license types, including, commercial licensing for cultivation, testing laboratories, retail sales, and manufacturing and distribution for both medical and adult-use cannabis businesses. In addition, Del Ray Oaks, King City, and Salinas are all friendly to the industry and permit a variety of license types for both medical and adult-use businesses.

Monterrey County passed a series of ordinacnes over 2016 and 2017 to regulate the emerging, legal medical cannabis industry, and in March 2018 finally enacted regulations to allow certain medical cannabis businesses to expand to adult-use upon licensure. The ordinance striked the term "medical" throughout the current cannabis regulations so that the ordinances are applicable to all commercial cannabis businesses. It added a new license Type 1C “specialty cottage” cultivation type which allows for a combination of natural and artificial light of 2,500 square feet or less of canopy area or 500 square feet or less of canopy area for indoor cultivation (outdoor excluded). The ordinance also updated definitions including making the term “Retailer” interchangeable with “Dispensary”. Finally, it removed the “Transportation” license type and added language that would permit self-distribution/transportation for cultivators, nurseries, and manufactures provided they comply with the distribution requirements imposed by the State. On November 8, 2016, voters of the county approved adding chapter 7.100 to the county code thereby imposing a commercial cannabis business tax on all commercial cannabis businesses. Licensing Chapter 7.90 of the Monterey County Code requires all cannabis businesses located in the unincorporated areas of the County to obtain and maintain a Commercial Cannabis Business Permit. This is an annual permit with requirements similar to the State licensing requirements. A Commercial Cannabis Business Permit may only be issued to a business operating on a property approved for

cannabis uses through a Use Permit or Coastal Development Permit. Background checks, hazmat or food handling permits, and specific security measures will be addressed as part of this Permit. The Permit must be renewed annually and any new business partners, employees, or land owners that were not included in the previous year’s permit renewal process will need to pass background checks for the annual renewal. As part of the regular compliance inspections, the County may conduct site inspections to ensure compliance with relevant regulations, laws, and permits. Application materials for a Commercial Cannabis Business Permit must contain all of the information required by Section 7.90.050 of the Monterey County Code. Chapter 7.90 can be found here: https://www.municode.com/library/ca/monterey_county/codes/code_of_ordinances?nodeId=TIT7BUTALIRE_CH7.90COMECAPE The fee for a Commercial Medical Cannabis Permit application is a deposit fee. The County will track time invested on each permit application and refund the amount of the deposit not used or bill the applicant if County costs for processing the permit exceeds the deposit amount. A fee for renewal of a Commercial Cannabis Business Permit will be due annually. The most current fee schedule for all permits can be found here: http://www.co.monterey.ca.us/government/departments-i-z/resource-management-agency-rma-/planning/resources/permit-fees All cannabis businesses within the unincorporated areas of the County must obtain and maintain the following permits:

• A Use Permit (in the Inland zones) or Coastal Development Permit (in the Coastal zone) from the Monterey County Resource Management Agency – Planning Division;

• A Commercial Cannabis Permit pursuant to Chapter 7.90 of the Monterey County Code from the Monterey County Resource Management Agency; (Type "A" for adult-use, Type "M" for medicinal use.)

• A Business License if and when applicable, from the Monterey County Treasure/Tax Collector; and

• All applicable State licenses.

Cannabis related land use permits will begin with a Development Review Committee (DRC) application. Materials submitted with the application should address those items listed in Section 21.67.100 of the Inland zoning ordinance (Title 21) or Section 20.67.100 of the coastal zoning ordinance (Title 20). Application materials must also address requirements specific to the type of cannabis business activity requested. Cannabis operations must be located in the appropriate zoning district and may not be located within 600 feet of a school, park, or drug recovery facility. Please note: all cultivation must be within an existing warehouse or greenhouse that was legally established before January 1, 2016, and all operations and development must comply with all relevant County land use and development standards. Laws and Regulations Title 21 Inland Zoning Commercial Cannabis Regulations Title 20 Coastal Zoning Commercial Cannabis Regulations Chapter 7.90 Business Permit Regulations

Chapter 7.02 Business Permit License Resolution of Intent for Coastal Areas Chapter 21.67 Commercial Medical Cannabis Activities Recent News 06/26/2018 The Californian: Marijuana Just Saved Monterey County’s budget Resources County website for cannabis regulations Memorandum: Status of Commercial Cannabis Operations in Monterey County - Permitting, Enforcement and Tax Reporting - June 29, 2018 Memo: Initial Commercial Cannabis Business Permit Application Initial Commercial Cannabis Business Registration Form Treasurer/Tax Collector - Administrative Rules and Procedures Memo - Temporary State Licensing, Local Authorization, and the County's New Regulations (12/13/17) Memo – Cannabis Permit Process Update (8/23/17) Memo – Cannabis Permit Process Update (6/30/17) Memo - Cannabis Permit Process Update (2/27/17) Administrative Rules & Procedure Form Cannabis Permit Fees County Frequently Asked Questions Medical Marijuana Interim Ordinance (Urgency Measure) - (REF150047, County-Wide) (Posted 7/2/15) Medical Marijuana Zoning Webapp Development Review Committee Request Form Commercial Cannabis Business Permit Application Contact

168 West Alisal St., 1st Floor Salinas CA 93901ard of Supervisors

PO Box 1728 Salinas CA 93902 (831) 755-5066 http://www.co.monterey.ca.us/government/board-of-supervisors

San Luis Obispo County LIMITED OPPORTUNITY Overview Region: South Sub-region: Central Valley Communities: Arroyo Grande, Atascadero, Grover Beach, San Luis Obispo, Los Osos Location: San Luis Obispo County is located on the central coast of California. It is the third largest wine producing county in the state. Sometimes abbreviated SLO, it is located directly between Los Angeles and San Francisco Bay. US Census Bureau Statistics Population: 282,887 (2015) Median Household Income: $60,691 (2015) Total Retail Sales: $3,624,029,000 (2015) Election Results Prop. 64 Results – Y: 72,593 (57.3%) - N: 54,181 (42.7%) Prop. 19 Results – Y: 54,247 (51.5%) - N: 51,158 (48.5%) Summary San Luis Obispo County remains a limited opportunity county for the cannabis industry, offering limited licensing options for longstanding medical cannabis businesses only. Recently the County decided to allow medical businesses to expand to adult-use, including commercial cultivation, testing laboratories, manufacturing and distribution businesses. On November 27, 2017 the Board of Supervisors adopted Ordinance Number 3360, amending Chapter 6.08 and adding Chapter 6.90 to the San Luis Obispo County Code to allow for the licensing of cannabis businesses. Specifically, the draft ordinance would: • add "Cannabis businesses" to the list of business types that are to be reviewed by the Sheriff-

Coroner; • incorporate definitions of cannabis businesses and activities contained in Section 22.80.030 (Land

Use) of County Code and Chapter 6 Section D of the Framework for Planning - Coastal Zone of the County General Plan;

• establish application requirements for cannabis businesses; • establish application procedures for cannabis businesses; • describe review and investigation by the Sheriff-Coroner, including applicable timeframes; and • require the display of the business license on the premises at all times. Subsequently at the same time, the board approved two other ordinances enacting specific land use and regulatory requirements addressing coastal and inland businesses separately, and detailing which license types are permitted. On September 20, 2016, the County of San Luis Obispo established a moratorium on the cultivation of cannabis (marijuana) in all unincorporated areas of the county, with certain exceptions for medical purposes and existing cultivators. Cannabis dispensaries are currently provisionally permitted in the inland portions of the County only.

Laws and Regulations Cannabis Regulations Resources Planning and Building Department website for cannabis regulations Contact

Board of Supervisors 1055 Monterey St. Room D430 San Luis Obispo, CA 93401 (805) 781-5450 http://www.slocounty.ca.gov/bos.htm

Santa Barbara County LIMITED OPPORTUNITY Overview Region: South Sub-region: San Joaquin Valley Communities: Santa Maria, Santa Barbara, Lompoc, Goleta, Guadalupe, Montecito Location: Santa Barbara is a varied county. It has significant resource drilling, winemaking, agriculture, and engineering industries. It is also home to a burgeoning technology sector. As a border county, southern Santa Barbara County is usually considered part of the southern region. US Census Bureau Statistics Population: 446,170 (2015) Median Household Income: $63,985 (2015) Total Retail Sales: 4,853,808,000 (2015) Election Results Prop. 64 Results – Y: 101,185 (61.1%) - N: 64,295 (38.9%) Prop. 19 Results – Y: 68,108 (52.0%) - N: 63,088 (48.0%) Summary While passing a moratorium on adult-use businesses initially after the passage of Proposition 64, the County has since reversed its decision to allow a limited number of adult-use businesses in unincorporated areas of the County. On February 27, 2018, the Santa Barbara County Board of Supervisors adopted a series of ordinances that regulate commercial cannabis operations within the County's unincorporated area. The ordinances categorize cannabis operations into eight permit types, and allow each license type in certain zones throughout the County's unincorporated area. The Ordinance is in effect for the Inland area of the County (Land Use and Development Code). The Ordinance for the Coastal Zone (Article II) will not be in effect until it is certified by the California Coastal Commission. On May 1, 2018, the Santa Barbara County Board of Supervisors adopted the Cannabis Business License Ordinance, which added a local commercial cannabis business license to the County Code, added a complete outdoor cannabis cultivation ban in the coastal zone, an acreage limit of 186 acres to the Carpinteria Agricultural Overlay District, and a limit of 8 retail licenses for the County. Upon passage of Ordinance number 5037 in May 2018, the County enacted regulations and requirements including but not limited to: • Requiring a local Cannabis Business License for anyone engaged in any commercial cannabis activity;

and requiring that Cannabis Business Licenses to be renewed every year and are non-transferable; • Establishing cannabis cultivation area caps, a retail license cap of 8 stores (two in each Supervisorial

District), and a selection process for those that may seek a capped cannabis cultivation or retail license;

• Requiring licensees to maintain their operations in compliance with their land use permits, state cannabis licenses and require that they pay their taxes;

• Establishing clear roles and procedures for cannabis businesses, and county departments, as they engage in processes of applying, reviewing, inspecting, approving or denying, renewing, suspending, revoking or appealing cannabis business licenses;

• Establishing a multi-departmental cannabis compliance team from Planning & Development, Sheriff, Agricultural Commissioner, Fire, and Public Health to support the County Executive approving or

rejecting applications and renewals and the Treasurer-Tax-Collector in issuing the cannabis business license or noticing the applicant of a denial; and

• Establishing standards for operations, compliance reviews, as well as, enforcement and penalties for failure to comply with cannabis business license requirements.

In addition, the City of Santa Barbara permits nearly every license type for both medical and adult-use cannabis businesses, and has enacted robust regulations for the industry. The small town of Lompoc is also very friendly to the industry. Laws and Regulations February 14, 2017 Attachment A - Medical Marijuana Overview February 2014 Attachment B - Proposition 64 Measure Language Summary Marijuana Regulations and Impacts of Proposition 64 Marijuana Regulations & Impacts of Proposition 64 Proposed Ordinance Establishing a Non-personal Cannabis Cultivation and Related Operations Registry Program (Second Reading) - April 11, 2017 Attachment 2A - Draft County Registration Form Medical Cannabis Cultivation and Future Non-Medical Cannabis Cultivation and Related Operations Attachment 2B - Draft County Registration Form Medical Cannabis Cultivation and Future Non-Medical Cannabis Cultivation and Related Operations Article X Medical Marijuana Regulations Recent News KEYT 07/03/2018: Santa Barbara’s only medical cannabis dispensary finally open for business Lompoc Record 06/30/2017: Overflow crowd attends Santa Barbara County cannabis forum Resources County website for cannabis regulations Contact

Board of Supervisors https://www.countyofsb.org/bos/home.c

Santa Cruz County LIMITED OPPORTUNITY Overview Region: Central Sub-region: Bay Area Communities: Capitola, Santa Cruz, Watsonville, Boulder Creek, Brookdale, Davenport, Felton, Live Oak, Scotts Valley, Pleasure Point, Rio Del Mar, Twin Lakes, Opal Cliffs Location: Santa Cruz County comprises the Santa Cruz-Watsonville, CA Metropolitan Statistical Area, which is also included in the San Jose-San Francisco-Oakland, CA Combined Statistical Area. The county is located on the California Central Coast, south of the San Francisco Bay Area region. The county forms the northern coast of the Monterey Bay, with Monterey County forming the southern coast. It contains 607 square miles of total area, making it the second-smallest county in California by land area and third-smallest by total area. U.S. Census Bureau Statistics Population: 274,146 (2015) Median Household Income: $67,256 (2015) Total Retail Sales: 4,367,955,000 (2012) Election Results Prop. 64 Results – Y: 79,736 (69.9%) - N: 34,336 (30.1%) Prop. 19 Results – Y: 61,330 (64.1%) - N: 34,405 (35.9%) Summary The Board of Supervisors adopted County Code 7.130 on August 2, 2016 and amended it on November 7, 2017. The ordinance approved the licensing of twelve retail dispensaries which are allowed to sell cannabis and cannabis products for either medical or adult-use in the unincorporated area of the County. There are 12 dispensaries currently licensed. In November 2017 the County passed a series of ordinances to allow the existing medical businesses to expand to adult-use. On May 8th, 2018 the County Board of Supervisors adopted final ordinances to regulate non-retail commercial cannabis businesses involving cultivation, manufacture and distribution in unincorporated areas of the county. Only retail dispensaries licensed by the County of Santa Cruz may deliver cannabis products to clients within the unincorporated area of the County. History In 1992, voters in Santa Cruz County enacted Measure A, which added Chapter 7.122 to the County Code declaring support for making cannabis available for medical use. Four years later, Californian voters approved the Compassionate Use Act of 1996, enabling medical cannabis use under limited, specified circumstances. In 2013, the County Board of Supervisors adopted an ordinance prohibiting medical cannabis businesses (up to some level of immunity from enforcement for certain businesses). This ordinance was repealed in 2015 after the passage of the Medical Marijuana Regulation and Safety Act. It was replaced with Chapter 7.130 of the County Code, again allowing for licensed medical cannabis dispensaries to operate under a framework that complies with MCRSA. Current Laws and Regulations

Santa Cruz County Code Local Taxes Santa Cruz County Code, Title 4, Chapter 4.06, Cannabis Business Tax imposes a tax of up to 10% of gross receipts for commercial cannabis businesses. Land Use and Zoning Requirements Cultivation zoning and land use requirements dependent on the category of license. No license may be issued to operate a dispensary unless the dispensary is located in a zone district designated as PA (Professional and Administrative Offices), C-1 (Neighborhood Commercial), C-2 (Community Commercial), C-4 (Commercial Services), or CT (Tourist Commercial) by the Santa Cruz County Zoning Ordinance. Recent News Santa Cruz Sentinel 04/24/2018: Santa Cruz County signs off on pot production rules Santa Cruz Sentinel 12/15/2016: Santa Cruz County encourages cannabis growers to step into legal light Santa Cruz Sentinel 12/13/2016: Santa Cruz County OKs moratorium on nonmedical cannabis Resources Santa Cruz County Cannabis Licensing Office Contact

Santa Cruz County Cannabis Licensing Office 701 Ocean Street, Room 520 Santa Cruz, CA 95060 (831) 454-3833 CannabisInfo@SantaCruzCounty.us

Santa Cruz (City), California LIMITED OPPORTUNITY Overview Region: Central Sub-region: Central coast County: Santa Cruz County Location: Santa Cruz is the county seat and largest city of Santa Cruz County. Situated on the northern edge of Monterey Bay, about 32 mi south of San Jose and 75 mi south of San Francisco, the city is part of the 12-county San Jose-San Francisco-Oakland Combined Statistical Area. Special Notes: Santa Cruz is known for its moderate climate, the natural beauty of its coastline, redwood forests, alternative community lifestyles, and socially liberal leanings. It is also home to the University of California, Santa Cruz, a premier research institution and educational hub, as well as the Santa Cruz Beach Boardwalk, an oceanfront amusement park operating continuously since 1907. US Census Bureau Statistics Population: 64,220 (2015) Median Household Income: $62,164 (2015) Total Retail Sales: $773,249,000 (2012) Summary and Recent Developments Santa Cruz City Council adopted Cannabis Regulations on November 28, 2017. Under the City’s ordinance, the City will allow five (5) retail dispensaries in industrial and limited commercial zones. Commercial cultivation is limited to 10,000 square feet of indoor growth in industrial zones. Manufacturing and distribution are also allowed in industrial zones. All commercial cannabis uses require the approval of an administrative use permit at a public hearing. Retail uses also require a cannabis retailer license. The City is not regulating personal use beyond what is allowed by state law. Current Laws and Regulations CANNABIS ORDINANCE 11-14-17 Local Taxes Santa Cruz City Municipal Code, Title 5, Chapter 5.07 establishes a potential business tax at a rate of up to 10% of gross receipts for all cannabis businesses. Currently, the ordinance sets the tax rate at 7% of gross receipts. Recent News Santa Cruz Sentinel 12/28/2017: Recreational Marijuana Santa Cruz names city’s five cannabis license retailers The Mercury News 12/16/2016: Permitting California pot: How new regulations aid Santa Cruz growers Resources City of Santa Cruz Planning and Community Development Cannabis License and Regulations City of Santa Cruz Cannabis Regulations Flow Chart

Cannabis Ordinance Restricted Area Interactive Map

Watsonville POTENTIAL OPPORTUNITY Overview Region: Central Sub-region: Central Coast County: Santa Cruz County Location: Watsonville is located approximately 20 miles south of Santa Cruz on the central coast of California. The Pajaro Valley, where Watsonville is situated, has a mild climate that makes it attractive to produce producers and vacationers alike. Special Notes: Due to its proximity to Santa Cruz, Watsonville and its beaches are a draw for many young college students who attend the University of California, Santa Cruz. The city’s economy centers predominantly around the farming industry, where a variety of produce is grown before being exported around the world. High demand from nearby metropolitan centers has made the city one of the most important farming cities in the county for its agro-business market. West Marine, a boating and fishing supply chain store, is one of the largest companies headquartered in Watsonville. US Census Bureau Statistics Population: 53,628 (2015) Median Household Income: $46,018 (2015) Total Retail Sales: $1,118,345,000 (2012) Recent Developments The City Council adopted the Medical Cannabis Facilities Ordinance No. 1352-17 (CM) on May 9, 2017, which went into effect on June 20, 2017, and is codified as Chapter 14-53 of the Watsonville Municipal Code. Subsequently, the City Council adopted an ordinance to amend WMC Chapter 14-53 to allow existing licensed cannabis cultivators and manufacturers to produce and sell cannabis for both the medical and adult-use markets. This amendment went into effect on March 13, 2018. In 2016, the Watsonville City Council adopted Ordinance No. 1326-16 (CM) to regulate the establishment of cannabis cultivation facilities. The maximum number of six (6) permits have been approved, and no applications for new cultivation facilities are being accepted at this time. The Ordinance allows the establishment of up to nine (9) cannabis manufacturing facilities in Watsonville. In 2017, seven (7) facilities met the eligibility criteria and were issued permits. The application period will reopened for the remaining two (2) spots on February 1, 2018 and closed March 30, 2018. No new applications have since been accepted nor is the city expected to take any further actions in the near future. Watsonville currently permits indoor, outdoor, and mixed light medical cannabis cultivation and has recently introduced new provisions for medical cannabis manufacturers. History On February 12, 2016, City Council adopted an ordinance allowing medical cannabis cultivation in the city. Later amendments effectively limited the number of cultivation facilities to 6, and limited the location of cultivation facilities to one business on each parcel. The ordinance also established a committee to work on creating comprehensive regulations for all medical cannabis license types. Since

April, 2016, Watsonville has approved six new Use Permits for cultivation facilities, in addition to one preexisting cultivation facility that was approved prior to the ordinance being adopted. Current Laws and Regulations The Cannabis Facilities Ordinance Local Taxes Ballot Measure L, approved in 2016, imposes a tax of no more than $20 per square foot of canopy on cultivators, no more than 2.5% on gross sales receipts from manufacturers and no more than 10% on gross sales receipts from retail sales. Resources Watsonville Community Development Department Cannabis Facilities

Tulare County, California CHALLENGING OPPORTUNITY Overview Region: Central Sub-region: Inland Empire Communities: Visalia, Tulare, Porterville, Dinuba, Lindsay, Exeter, Woodlake Location: Tulare County contains Sequoia National Park as well as parts of Kings Canyon National Park. Otherwise, it is a primarily agricultural region. US Census Bureau Statistics Population: 460,437 (2015) Median Household Income: $42,031 (2015) Total Retail Sales: 3,903,527,000 (2015) Election Results Prop. 64 Results – Y: 41,837 (44.1%) - N: 53,127 (55.9%) Prop. 19 Results – Y: 27,390 (33.7%) - N: 53,816 (66.3%) Summary Tulare County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. With the small town of Woodlake as an exception, Tulare County is potentially one of the most restrictive local settings for the cannabis industry. Woodlake permits nearly every license type of both medical and adult-use cannabis businesses.

On December 6, 2016, the Board of Supervisors adopted an Interim Zoning Ordinance as an urgency measure banning all commercial adult-use cannabis activity. Laws and Regulations Interim Zoning Ordinance Recent News Action News 30 12/6/2016: Tulare County Supervisors Say No To Non-Medical Commercial Marijuana By Passing Interim Ordinance Resources Contact

Board of Supervisors http://tularecounty.ca.gov/board/index.cfm/contact-us/

Tuolumne County, California CHALLENGING OPPORTUNITY Overview Region: Central Sub-region: Sierra Nevada Communities: Sonora, Cedar Ridge, Tuolumne, Cold Springs, Mono Vista Location: Tuolumne is situated in east central California. Its county seat, Sonora, is the only incorporated city in the county. Tuolumne contains the eastern part of Yosemite National Park. US Census Bureau Statistics Population: 53,804 (2015) Median Household Income: $50,306 (2015) Total Retail Sales: $573,262,000 (2012) Election Results Prop. 64 Results – Y: 12,443 (51.9%) - N: 11,546 (48.1%) Prop. 19 Results – Y: 9,806 (43.7%) - N: 12,602 (56.3%) Summary Tuolumne County currently prohibits all commercial cannabis activity, and there are no opportunities in the foreseeable future. With the small town of Sonora as an exception, where only a limited number of testing laboratories and manufacturing businesses are permitted for both medical and adult-use, and only a limited number of retail dispensaries are permitted for only medical cannabis. Tuolumne County is potentially one of the most restrictive local settings for the cannabis industry.

On January 3, 2017, the Board of Supervisors approved an ordinance to amend chapter 17.67 of the county code to prohibit commercial cannabis activities that require a state license to be issued. Laws and Regulations Amendments to Chapter 17.67 of the Tuolumne County Ordinance Code Resources Contact

Tuolumne County, CA 2 South Green St. Sonora, CA 95370-4618 (209) 533-6600 http://www.co.tuolumne.ca.us/index.aspx?NID=132

California Municipal Report – SOUTHERN REGION

Imperial County LIMITED OPPORTUNITY Overview Region: South Sub-region: Far South Communities: El Centro, Calexico, Imperial, Holtville, Salton City Location: Imperial County is located in the far southeast of the state. It lies in the Imperial Valley, bordering both Arizona and Mexico. Special Notes: Imperial County is the smallest but most economically diverse region in California. Although this region is a desert, the economy is heavily based on agriculture due to irrigation. In 2014, the county had the second highest unemployment rate of any counties in the U.S. at 23.6 percent. US Census Bureau Statistics Population: 180,191 (2015) Median Household Income: $41,079 (2015) Total Retail Sales: $1,676,853,000 (2012) Election Results Prop. 64 Results – Y: 18,165 (44.7%) - N: 22,434 (55.3%) Prop. 19 Results – Y: 8,692 (32.3%) - N: 18,175 (67.7%) Summary Imperial County has historically been restrictive on cannabis laws, with no history of permitting commercial cannabis activities until as recently as spring 2018. In November 2017, The County Board of Supervisors approved an ordinance to incorporate and adopt the Medicinal and Adult-Use Cannabis Regulation and Safety Act, as defined in section 14.01.020 of the County of Imperial Codified Ordinances, and to further regulate, where permitted, the use and personal cultivation of Cannabis, and businesses engaged in Commercial Cannabis and Industrial Hemp activities, within the unincorporated areas of the County of Imperial. In January 2018 the County began accepting commercial cannabis activity licenses with a lottery selection process that was conducted in April 2018. The County recently approved for the first time, five (5) virtual retail and delivery operations, one (1) physical medicinal dispensary with delivery included, and five (5) wholesale distribution operations, in accordance with lottery system as created by ordinance. The ordinance included zoning limitations and other regulatory requirements. In 2017 the Imperial County Board of Supervisors held public discussions regarding issues related to the implementation of AUMA, including local options for enforcement, regulation and taxation. The Board went on to consider recommendations for creating and adopting an ordinance to regulate or prohibit the commercial sale, cultivation, testing and processing of cannabis in the unincorporated communities of the county.

Within the County, few jurisdictions provide licensing approval for either medical or adult-use cannabis businesses. Some municipalities that have recently opened up limited licensing opportunities include the city of Imperial (medical retail dispensary only), and Calexico, which permits a limited number of commercial cultivation, testing laboratories, manufacturing and distribution for both medical and adult-use, but no retail dispensaries. Laws and Regulations County Code Resources Imperial County Board of Supervisors / Clerk of the Board 940 W. Main Street, Suite 209 El Centro, CA 92243-2839 (442) 265-1020 www.co.imperial.ca.us.

Los Angeles County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: Southland Communities: (all cities with populations over 50k) Los Angeles (City), Long Beach, Glendale, Santa Clarita, Lancaster, Palmdale, Pomona, Torrance, Pasadena, El Monte, Downey, Inglewood, West Covina, Norwalk, Burbank, Compton, South Gate, Carson, Santa Monica, Whittier, Hawthorne, Alhambra, Lakewood, Bellflower, Baldwin Park, Lynwood, Redondo Beach, Pico Rivera, Montebello, Monterey Park, Gardena, Huntington Park, Arcadia, Diamond Bar, Paramount, Rosemead, Glendora Location: Los Angeles County is located along the southwest pacific coast of California, approximately 135 miles north of the U.S./Mexico border, approximately 120 miles north of San Diego, approximately 108 miles southeast of Santa Barbara, and 112 miles south of Bakersfield. Los Angeles County is divided west to east by the San Gabriel Mountains. Major divisions in the county include: Eastside, San Gabriel Valley, Pomona Valley, Westside, Beach Cities, South Bay, South Los Angeles, Palos Verdes Peninsula, Gateway Cities, Harbor Region, San Fernando Valley, Crescenta Valley, Conejo Valley, Antelope Valley, Santa Clarita Valley, Downtown, Mid-Wilshire, and Northeast L.A.. Special Notes: Los Angeles County is the most populous county in the United States, and is larger than 42 individual U.S. states, making it one of the largest municipal entities in the country and potentially the largest cannabis marketplace in the world. Los Angeles has 88 incorporated cities and many unincorporated areas, including the City of Los Angeles, the County Seat, which is also its most populous city in California at about four million. The County is home to more than one quarter of all California residents (27%) and is one of the most ethnically diverse counties in the U.S. The County has 4,083 total square miles of area, (including more than 70 miles of coastline on the Pacific Ocean and also encompasses mountain ranges, valleys, forests, islands, lakes, rivers and desert. US Census Bureau Statistics Population: 10,170,292 (2015) Median Household Income: $56,196 (2015) Total Retail Sales: $121,389,378,000 (2012) Election Results Prop. 64 Results – Y: 1,507,711 (58.6%) - N: 1,064,711 (41.4%) Prop. 19 Results – Y: 1,080,331 (48%) - N: 1,168,588 (52%) Summary By some estimates, the medical cannabis market in Los Angeles County is worth upwards of $1 billion, larger than Denver’s entire combined medical and adult-use market. With adult-use sales now legal in the state, there is mounting pressure to pass adult-use regulations in Los Angeles County, however the County has maintained a moratorium on permitting any cannabis businesses in unincorporated areas of the County through 2018. In 2017, the City of Los Angeles conducting a series of public meetings, workshops and task force studies, eventually leading to the passage of one of the state’s most robust and developed local cannabis licensing schemes, including provisions for a social equity program and nearly every license type for both medical and adult-use cannabis businesses. While the County Board itself remains opposed to permitting cannabis businesses in unincorporated areas of the County, many local jurisdictions within the County are seeking to develop a regulated and robust cannabis industry to

service southern California tourism, and product manufacturing and distribution for the entire state, making Los Angeles County a rival marketplace to the hotbed regions of the North coast. Currently, all cannabis businesses are banned in the unincorporated areas of Los Angeles County. This ban will remain in place until the County adopts a comprehensive regulatory framework for cannabis businesses. The County established the Office of Cannabis Management (OCM) in late 2016 to develop cannabis policies for the unincorporated areas, in collaboration with numerous County departments. The OCM released a set of proposed policies in December 2017, which were presented to the Board of Supervisors for consideration during a public hearing in early 2018 but were rejected pending further studies and department discussions. From May through August 2017, the OCM conducted extensive outreach to solicit feedback on stakeholder desires and concerns for commercial cannabis regulations, including twenty public listening sessions held throughout the County, numerous presentations to community groups and town councils, and convening of an Advisory Working Group with members representing a diverse range of fields and perspectives. Many of these objectives were articulated in motions adopted by the Board in February 2017 and November 2017. While many supporters engaged the County Board and created public pressure in support of regulations, the County still remained heavily influenced by prohibitionists and conservative community groups. At this time, it is not known when the County will begin accepting applications or issuing licenses to cannabis businesses. Prospective business operators are encouraged to sign up for the OCM’s email listserv to receive updates on cannabis policy development for the unincorporated areas. Local Summary Here is a summary of the jurisdictions within Los Angeles County that have enacted ordinances to permit cannabis businesses: (in alphabetical order)

• Baldwin Park: commercial cultivation, manufacturing and distribution for medical and adult-use. • Bell: commercial cultivation, testing laboratories manufacturing and distribution for medical. • Bellflower: commercial cultivation, manufacturing, distribution and retail sales for medical and

adult-use. • Carson: commercial cultivation, testing laboratories, manufacturing and distribution for medical

and adult-use. • Culver City: commercial cultivation, testing laboratories, manufacturing, distribution and retail

sales for medical and adult-use. • El Monte: commercial cultivation, testing laboratories, manufacturing and distribution for

medical. • Huntington Park: commercial cultivation, manufacturing, distribution and retail sales for

medical. • Lancaster: commercial cultivation and manufacturing for medical. • Long Beach: commercial cultivation, testing laboratories, manufacturing, distribution and retail

sales for medical. • City of Los Angeles: commercial cultivation, testing laboratories, manufacturing, distribution and

retail sales for medical and adult-use. • Lynwood: commercial cultivation, testing laboratories, manufacturing and distribution for

medical and adult-use. • Malibu: retail sales for medical.

• Maywood: commercial cultivation, testing laboratories, manufacturing, distribution and retail sales for medical and adult-use.

• Pasadena: commercial cultivation, testing laboratories, and retail sales for medical and adult-use, and distribution for medical.

• Santa Monica: commercial cultivation, testing laboratories, manufacturing, distribution and retail sales for medical.

• Vernon: retail sales for medical. • West Hollywood: testing laboratories, retail sales and on-site consumption for medical and

adult-use. Recent Developments Since June 2016, when the County Board of Supervisors passed a temporary ban (Interim Ordinance Number 2016-0031U) on all cannabis licensing types, extending to June 28, 2017, applicable to all unincorporated areas of Los Angeles County, the Board has passed ongoing moratoriums to prohibit commercial cannabis activities in unincorporated areas of the county. Resources Los Angeles County Board of Supervisors 500 West Temple St. Suite 383 Los Angeles, CA 90012 (213) 974-1411 Email: executiveoffice@bos.lacounty.gov Website: http://bos.lacounty.gov/

Bellflower, California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland County: Los Angeles County Location: Bellflower is east of Compton, north of Lakewood, west of Norwalk, and south of Downey, and is located about 18-21 miles southeast from downtown Los Angeles or 37-42 minutes estimated in drive time; Bellflower is immediately adjacent to I-710, I-105, I-605 and Highway 91. U.S. Census Bureau Statistics Population: 78,441 (2015) Median Household Income: $48,823 (2015) Total Retail Sales: $ 551,517,000 (2012) Summary and Recent Developments Bellflower has not previously approved or regulated medical cannabis dispensaries, but its city officials have recently seized upon the opportunities presented under the Adult Use of Marijuana Act, to usher in a new, regulated adult use cannabis industry. In fall of 2016, the City Council reviewed a report and conducted multiple study sessions and received public input upon consideration of a comprehensive cannabis-business proposal, allowing for up to 12 cannabis businesses to be permitted in the city. On March 12, 2018 the City Council adopted Ordinance Number 1351 to amend various sections of the Bellflower Municipal Code regulating cannabis business permits and conditional use permits. The City Council specifically intended that all amendments implemented by this Ordinance be retroactively effective on February 26, 2018. On August 28, 2017, the Bellflower City Council approved Ordinance Number 1323 (which authorized limited commercial cultivation, manufacturing, retail dispensaries, and delivery. Under Ordinance Number 1323, the City permitted up to twelve (12) permits for medical cannabis facilities only. Of those twelve (12) permits, four (4) may be issued for retail dispensaries. Other regulations were applied such as limiting the combination of licenses at the same locations, zoning and local business history requirements. In addition, Ordinance 1323, addressed program application fees and timeframe, distance requirements, timing of medical versus adult-use permitting, and the total number of permits to be allowed. As the ordinance currently reads, it would repeal chapter 8.48 and section 17.04.110 of the Bellflower Municipal Code (BMC), and add Title 14 and Chapter 17.94, pertaining to the regulation of cannabis-related businesses and land uses. The new ordinance will essentially make Bellflower one of the first municipalities in the Los Angeles County and the Los Angeles Metropolitan area to permit retail (adult-use) cannabis cultivation, manufacturing and sale. At the the November 28, 2016 meeting, the City Council approved multiple resolutions related to new cannabis taxes, adding Ordinance Number 1332, the “Cannabis Tax Proposition” to the March 7, 2017 municipal ballot which was successfully passed by voters.

Long Beach, California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland County: Los Angeles County Location: Long Beach is located on the Pacific Coast of the United States, within the Greater Los Angeles area of Southern California. Long Beach lies in the southeastern corner of Los Angeles County and borders Orange County. Downtown Long Beach is approximately 22 miles south of Downtown Los Angeles, though the two cities share an official border for several miles. Long Beach has 50.293 square miles of total land area. Special Notes: Long Beach is the 36th most populous city in the United States and the 7th most populous in California. Long Beach is the second largest city in the Los Angeles metropolitan area, and the third largest in Southern California behind Los Angeles and San Diego. The Port of Long Beach is the second busiest container port in the United States and is among the world's largest shipping ports. The city also maintains a robust oil industry with wells located both directly beneath the city as well as offshore. Manufacturing sectors include those in aircraft, automotive parts, electronic equipment, audiovisual equipment, and home furnishings. U.S. Census Bureau Statistics Population: 474,140 (2015) Median Household Income: $52,783 (2015) Total Retail Sales: $3,783,946,000 (2012) Summary and Recent Developments The City of Long Beach has become a top promising opportunity jurisdiction for cannabis industry opportunities. Long Beach currently permits indoor and outdoor home grows; and commercial cultivation, testing laboratories, manufacturing, distribution and retail sales for both medical and adult-use cannabis. The City was originally a leader in the area for the unique and rather liberalized local medical cannabis industry, with a high proportion of doctor clinics and not-so-discreet dispensaries on the beachfront. The City recently expanded to allow adult-use businesses and delivery, and is expected to soon consider approval for on-site consumption.

Long Beach has continued to conduct public stakeholder meetings and pass updates to the City’s cannabis code, making the jurisdiction one of the friendliest to the cannabis industry in the state and in LA County specifically. The City’s exceptional support for the cannabis industry isn’t without stipulation however, as the City has created an aggressive prioritization process for licensing applicants with historic or business history in the City, or qualification for the social equity program. At the same time, the City has increased resources and support for enforcement efforts toward unregulated and illegal cannabis businesses operating in the City.

On January 9, 2018 the City passed Ordinance Number 17-0030 to impose a moratorium for one hundred and eighty (180) days, through and including, June 18, 2018. During the period of the moratorium the City will not accept or process any application or permit any adult-use business.

On October 10, 2017 The City Council passed Ordinance Number 17-0026 to amend the Long Beach Municipal Code by adding Section 5.90.300 related to the implementation of the State's Medical and Adult-Use Cannabis Regulation and Safety Act. The ordinance requires a 600-foot radius buffer from "day care centers" for cannabis businesses under Chapter 5.90 of the municipal code, and adds "clean-up" language so that Chapter 5.90 is consistent with MAUCRSA. Chapter 5.90, as currently written, refers to the former Medical Marijuana Regulation and Safety Act ("MMRSA") and its various provisions. In order to remain in line and compliant with MAUCRSA, and without amending the voter intent, such clean-up language was needed. In November 2016, Long Beach voters approved measure MM, which authorized up to 32 medical cannabis dispensaries and essentially an unlimited number of cultivation and manufacturing licenses, with zoning and land use regulations. The measure required that twenty-two (22) licenses were reserved for priority applicants and set a lottery to be held for the remaining ten (10) business licenses. The first two dispensaries opened by November 2017, and the Council took additional action in December 2017 and again in January 2018 to essentially ‘freeze’ the program while the city staff works on more comprehensive rules for different license types and expansion to adult-use. The City is also now considering a more progressive proposal for adult-use businesses and the city is considering how to better streamline licensing decisions for both medical and adult-use businesses at the same time. While there has been a flood of applications for retail dispensaries and cultivation facilities, the city has received only a dozen applications for medical manufacturing licenses, two testing laboratories and none for distribution. The Business License Division within the Department of Financial Management is the licensing authority for all medical cannabis businesses in the City of Long Beach. A maximum of 32 medical cannabis dispensaries can operate in the City and a temporary moratorium on processing pending applications that were turned in last year, is about to expire in 2018 when the City is anticipated to take additional action and changes to the licensing scheme with emphasis on social equity. Currently, there is no limit to the number of non-dispensary medical cannabis licenses that can be issued, including manufacturing, cultivation, laboratory and distribution facilities. The proposed ordinance currently being considered by the City will require adult-use dispensaries to co-locate with medical dispensaries. So far, nine such dispensaries have opened across the city, with 23 additional businesses in the process of attaining city approval. Non-retail businesses, such as cultivators, manufacturers, testing laboratories and distributors do not have to co-locate with medicinal businesses, but can if they chose. All businesses must meet various requirements, including enrolling in a training program that includes preventing youth from accessing marijuana. Long Beach officials will also consider a social equity program, similar to other cities, which seeks to level the playing field for those who have been penalized or adversely affected by prior laws on marijuana. By the second year of operation, businesses may be required to have at least 25 percent of annual work hours performed by individuals who meet the following requirements:

• The person is at or below 80 percent of the area median income of $250,000; • And, the person has either been arrested or convicted of a felony relating to the sale,

possession, use or cultivation of cannabis that would have a citation or misdemeanor under current law;

• or the person has lived in a Census tract in Long Beach for three years where the median income is at or below 80 percent of the area median income.

For dispensary applications, applicants must submit a “Medical Marijuana Business License Application Packet” to the Business License Division during the designated application period. The City will review applications, determine priority status, and provide applicants formal written notification of their priority status. Priority applicants who have complete applications and compliant locations are able to move on to the Department Review process (permits, inspections, etc.). Non-Priority applicants who have complete applications and compliant locations will be evaluated under the Priority Point System. Those with the highest points will be eligible to move on in the application process. If applicants have the same amount of points, a Public Lottery may have to be conducted to determine who can move on in the application process. Once applicants are approved during the Department Review process, they will be awarded the available business license. Generally speaking, the following criteria must be met for an applicant to be considered part of a priority group: Priority Group 1: • City of Long Beach September 2010 Lottery winner • Allowed by City Council to operate after February 14, 2012 • Have the same location under Chapter 5.87 Priority Group 2: • City of Long Beach September 2010 Lottery winner • Allowed by City Council to operate after February 14, 2012 • Does not have the same location under Chapter 5.87 In order to receive priority status, the applicant

must be the same legal entity that was operating under LBMC 5.87. An applicant that is a “Priority Group 1 or Priority Group 2” can apply for multiple dispensary locations; however, only one location will have priority. Priority is related both to the applicant and to the location - not just the applicant. Furthermore, an application will be awarded the Priority Point if it meets all of the following requirements: • Property is located outside of a one-thousand five-hundred (1,500) foot radius of all public and

private schools (as defined in Health and Safety Code § 11362.768(h)) and public beaches within the city limits; and

• Property is located outside of a one-thousand one-hundred (1,100) foot radius of all public parks and public libraries within the city limits.

Priority Groups 1 & 2 applicants have a period of six (6) months once the City first accepts applications for Medical Cannabis Dispensary Business Licenses to submit an application. The current open application periods are January 23, 2017 through July 24, 2017 for Priority Groups 1 & 2. Application materials are available for those dispensaries that are on the List of Potential Priority Applicants. Non-Priority applicants are no longer able to submit a dispensary application. The application process for these business types will be different from the dispensary application process, and will instead follow the standard business license application process in Long Beach. For non-dispensary applicants, following application submittal at the Business License Counter, applicants will have the ability to move immediately to Planning Review. The Planning Bureau will need to confirm that the business location meets all buffer zones and parking requirements.

Laws and Regulations Long Beach Title 3, Chapter 3.80 – Business License Tax Section Number 261 Long Beach Title 5, Chapter 5.90 – Medical Marijuana Businesses

Recent News Press Telegram 06/22/2018: Long Beach’s pioneering marijuana social-equity program aims to tackle racial, economic injustice Long Beach Post 06/18/2018: Long Beach may soon allow sales of recreational marijuana; here’s what you need to know Long Beach Gazettes 04/11/2017: Medical Marijuana Dispensaries In Long Beach Go to Next Stage Press Telegram Marijuana 02/10/2017: Long Beach accepting applications to operate medical marijuana dispensaries Resources Department Review process Marijuana Business Information Contact

City of Long Beach, Business Licensing Division 333 W. Ocean Boulevard, 4th Floor Long Beach, CA 90802 Phone number: (562) 570-5150 Email: marijuanalicense@longbeach.gov Website: http://www.longbeach.gov/finance/business-info/business-licenses/marijuana-business-information/

Los Angeles (City), California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland County: Los Angeles County Location: Los Angeles lies in a large coastal basin surrounded on three sides by mountains reaching up to and over 10,000 feet, and one side by the Pacific Ocean coastline. Los Angeles is located in southwestern California, with 469 square miles of total land area. Special Notes: The City of Los Angeles and often known by its initials L.A., is the second-most populous city in the United States (after New York City), the most populous city in California and the county seat of Los Angeles County. Situated in Southern California, Los Angeles is known for its Mediterranean climate, ethnic diversity, sprawling metropolis, and as a major center of the American entertainment industry. The city is the focal point of the larger Los Angeles metropolitan area and the Greater Los Angeles Area region, which contain 13 million and over 18 million people, respectively, as of 2010, making it one of the most populous metropolitan areas in the world as well as the second-largest in the United States and the densest urban area in the United States. The city's inhabitants are referred to as Angelenos. Nicknamed the "City of Angels", Los Angeles is a global city with a diverse economy in entertainment, culture, media, fashion, science, sports, technology, education, medicine and research. It has been ranked 6th in the Global Cities Index and 9th in the Global Economic Power Index. The City is home to renowned institutions covering a broad range of professional and cultural fields, and is one of the most substantial economic engines within the United States. The Los Angeles combined statistical area (CSA) has a gross metropolitan product (GMP) of $831 billion (as of 2008), making it the third-largest in the world, after the Greater Tokyo and New York metropolitan areas. Los Angeles includes Hollywood and leads the world in the creation of television productions and recorded music; it is also one of the leaders in motion picture production. The city is divided into over 80 districts and neighborhoods, many of which were incorporated places or communities that merged into the city. These neighborhoods were developed piecemeal, and are well-defined enough that the city has signage marking nearly all of them. More broadly, the city is divided into the following areas: Downtown Los Angeles, East Los Angeles and Northeast Los Angeles, South Los Angeles, the Harbor Area, Greater Hollywood, Wilshire, the Westside, and the San Fernando and Crescenta Valleys. U.S. Census Bureau Statistics Population: 3,971,883 (2015) Median Household Income: $50,205 (2015) Total Retail Sales: $40,156,864,000 (2012) Summary and Recent Developments The City of Los Angeles a top promising opportunity jurisdiction for cannabis industry opportunities. Los Angeles currently permits indoor and outdoor home grows; and commercial licensing for cultivation,

testing laboratories, manufacturing distribution and retail sales for both medical and adult-use cannabis. Commercial cannabis license types include:

• Type 1A Specialty Indoor, Small; • Type 1B Specialty Mixed Light, Small; • Type 2A Indoor Small; • Type 2B Mixed-light Small; • Type 3A Indoor, Medium; • Type 3B Mixed-light Medium; • Type 4 Nursery; and • Type 5A Indoor, Large. • All cultivation sites are capped by square footage of ‘industrial space’.

Retail dispensaries and delivery services are allowed. Retail dispensaries are capped at one license for every 10,000 residents, while there can be one microbusiness for every 7,500 residents.

The City of Los Angeles is distinct in its creation of the City’s Department of Cannabis Regulation (“DCR”).

The Department of Cannabis Regulation, in conjunction with the Cannabis Regulation Commission, is responsible for licensing cannabis businesses within the City. In order to transition responsible operators who have sought compliance with City Code prior to implementation of MAUCRSA and AUMA, the City issued ‘Temporary Approval’ to qualified applicants. Temporary Approval provides qualified applicants “Local Authorization” and furthermore allow qualified applicants to continue to operate with limited-immunity until the applicant receives final approval for a License.

Generally, DCR is processing applications in a 3-phases approach:

PHASE 1 - CLOSED

DCR began accepting applications for “Proposition M Priority Processing” as described in Section 104.07 of the Los Angeles Municipal Code on January 3, 2018. The application filing period closed after 60-days.

PHASE 2 - OPENS AUG 1, 2018

DCR will begin accepting applications for “Non-Retailer Commercial Cannabis Activity Prior to January 1, 2016 Processing” as described in Section 104.08 of the Los Angeles Municipal Code on August 1, 2018. The application filing period will close after 30-days.

PHASE 3 - TO BE DETERMINED

DCR will accept and process applications for Commercial Cannabis Activity for the general public.

Beginning on Tuesday, July 3, 2018, registered owners of Proposition M Priority Processing commercial cannabis businesses with local authorization may pick-up their updated Temporary Approval documents. The Department has renewed all valid Temporary Approval documents for an additional 180-days; the updated Temporary Approval documents now reflect an issuance date of July 1, 2018.

History

Proposition D, which passed in 2013 and was implemented in 2014, was intended to reduce the number of dispensaries within the City of Los Angeles, limiting the total number to 135, although actual estimates of the number of dispensaries operating in L.A. range between 470-700. Over the last few years, L.A has deployed a number of administrative, code enforcement and zoning tactics to shut down hundreds of medical cannabis businesses that have failed to meet Proposition D requirements for immunity. On March 7, 2017, Los Angeles voted on two ballot measures to replace Proposition D, the Cannabis Enforcement, Taxation and Regulation Act (“CERTA“), backed by the City of Los Angeles, which later became Measure M, and the Los Angeles Marijuana and Regulation Safety Measure backed by the United Cannabis Business Alliance Trade Association (“UBCA”), known as Measure N. Only Measure M passed which has now set the stage for a new regulatory structure for medical cannabis businesses in Los Angeles. The UCBA ballot measure was much more comprehensive than the CERTA and its biggest difference is that it would have created a new regulatory agency and set up licensing structures for both medical and adult-use businesses. Measure M repealed Proposition D, which was passed by the voters in 2013. Proposition D limited the amount of dispensaries within the City of Los Angeles to 135, and provided them with a limited immunity. Measure M authorized the Los Angeles City Council to adopt medical cannabis regulations by September 30, 2017. The City has since held several work group and stakeholder meetings and some City Council members have been instrumental in the process by working with trade organizations, labor unions, department officials and industry representatives to draft a set of proposed regulations. The City will allow existing medical cannabis dispensaries (designated in the ordinance as EMMDs) that can demonstrate compliance with Proposition D, limited immunity and tax provisions to continue operating and give them priority in processing their applications. Further, Measure M set up a tax structure for medical cannabis businesses. Beginning January 1, 2018, licensed medical cannabis businesses will be taxed $100 for every $1,000 of gross receipts from cannabis, $10 for every $1,000 of gross receipts for transporting, testing, or researching cannabis, and $20 for every $1,000 of gross receipts for manufacturing or cultivating cannabis or cannabis products. Some economic analysts and major publications, such as Forbes, are predicting L.A.’s medical cannabis market could reach $1 billion, however there is a long way to go before Measure M and subsequent regulations are implemented and regulated sales can reach higher levels. The "Los Angeles Marijuana Regulation and Safety Act" was a citizen initiative that was co-authored and sponsored by the UCBA and UFCW Local 770, which was passed by Los Angeles voters on March 7, 2017. On November 1, 2016, City Council approved the Los Angeles Marijuana Regulation and Safety Act for the March ballot. UCBA Trade Association, the largest trade association of Proposition D compliant medical cannabis dispensaries operating legally within the City of Los Angeles, has worked closely with stakeholder groups, including the Greater Los Angeles Collective Alliance, and voted unanimously in December 2016 to publicly support Proposition M, the City of Los Angeles sponsored cannabis regulatory ballot initiative. Both the citizen and city proposals will maintain protections for, and offer an expedited licensing process to, the city’s current 134 Proposition D compliant dispensaries. On August 19, 2016, the Los Angeles City Council Rules, Elections, Intergovernmental Relations, and Neighborhoods Committee was briefed on options that will allow Proposition D compliant dispensaries to conform to the newly created medical cannabis state licensing system, increase penalties and

enforcement to close down all illegal cannabis-related businesses, create a regulatory framework for the City of Los Angeles to implement the Adult Use of Marijuana Act (if approved in November 2016 through Prop 64), and extend Prop D’s gross receipts tax to all cannabis-related businesses. Upon passaged of Proposition 64 in 2016, the City provided limited criminal immunity to approximately 135 dispensaries, and has had a never-ending process of passing moratoriums and bans and changing the criteria by which dispensaries can qualify to stay open. In addition, the city of L.A. has done a poor job at enforcing such bans and has experienced a plethora of unregulated cannabis distributors which have operated unchecked for years and many have also supported elements of organized crime. The City passed more than 20 ordinances since 2007 in attempts to regulate the medical cannabis industry, and many of these attempts have proven unsuccessful and led to a number of lawsuits against the city. The City’s 2007 Medical Marijuana Interim Control Ordinance (ICO) was a temporary moratorium to prevent further proliferation of medical cannabis businesses while City officials planned to work to develop permanent regulations. The ICO prohibited any new medical cannabis businesses, but allowed those that had registered to pay taxes to continue operating. Out of the roughly 700 dispensaries operating in the City at the time, approximately 135 were registered to pay taxes. L.A. has never licensed or permitted medical cannabis businesses. With the ICO in 2007, L.A. implemented a temporary prohibition of cannabis dispensaries, while providing limited immunity to some businesses that registered to pay taxes. In January 2010, the City established a regulatory framework in an attempt to balance the proliferation of medical cannabis businesses, safe access for seriously ill patients, and overall public safety, by adopting Medical Marijuana Ordinance 181069 (MMO), adding Article 5.1 to Chapter IV of the L.A.MC. The MMO was subsequently amended by ordinances including the 2011 Temporary Urgency Ordinance 181530 (TUO). Proposition D was passed in 2013, which banned medical cannabis businesses while granting immunity to the ban to the roughly 135 businesses that (1) operated since 2007, (2) were previously registered with the City, and (3) would “continue to meet other requirements and operational standards.” Abuse of Proposition D has been rampant ever since. Multiple stores use one location for tax purposes and claim immunity, although that immunity is supposed to cover only one dispensary. According to City law enforcement, some shops with pre-ICO status abandon their original locations, and split into multiple dispensaries in locations outside their original police divisions. In this past year, L.A. began implementing Proposition D, which was intended to reduce the number of dispensaries within city limits to 135 — the number of dispensaries operating prior to September 14, 2007. A 2012 UCL.A. study estimated that L.A. had at least 472 dispensaries, and the city estimated that in 2013, when Proposition D passed, the city had around 700 dispensaries. Last April, L.A. City Attorney Mike Feuer proclaimed the city had successfully closed more than 500 illegal medical cannabis businesses operating within city limits. Feuer estimated about 120 stores meet the city’s guidelines for immunity, which require possession of a business tax registration or tax exemption certificate issued by the City on or before November 13, 2007, registration with the City Clerk by November 13, 2007, and registration with the City, subject to all subsequent medical cannabis ordinances, among other criteria. Unfortunately, many illegal cultivation sites and dispensaries continue operating and remain evasive from law enforcement. Confusing laws and lack of compliance has led to years of on-going litigation and exhausting drains on law enforcement resources.

The combination of a confusing legal landscape and bad attorneys led people to believe that the pre-ICO immune status of these businesses was a valuable commodity, with many referring to the immune businesses as “licensed.” That is not the case. An extremely active resale market exists in which people buy and sell pre-ICO businesses for roughly $1,000,000-3,000,000 (checked several online listings). However, the purchaser obtains no vested rights in owning a cannabis business and does not obtain a license. Further, the act of selling these nonprofit entities is generally unlawful in nature, as a nonprofit corporation is not owned by anyone, but is an entity formed to administer assets of the organization. One cannot buy or sell a nonprofit corporation itself, but can buy or sell its assets with approval from its board, and/or in accordance with its bylaws. Current Laws and Regulations Ordinance No. 185343 Cannabis Procedures Ordinance No. 185344 Cannabis Rules and Regulations Ordinance No. 185345 Cannabis Location Restrictions Ordinance No. 185025 Department of Cannabis Regulation and Cannabis Regulation Commission Ordinance No. 184841 Cannabis Enforcement, Taxation, and Regulation Act Los Angeles Municipal Code Chapter IV – Commercial Cannabis Activity Prohibition and Limit Immunity, Article 5.2.1 Los Angeles Municipal Code Chapter IV – Public Welfare, Article 5.1 Medical Marijuana (Proposition D) Los Angeles Municipal Code Chapter II – Licenses, Permits, Business Regulations, Article 1 – Business Taxes, Section 21.50 – Taxation of Medical Marijuana Collectives Recent News Herb 07/06/2019: Los Angeles to Finally Start Licensing Cannabis Growers PR Newswire 07/06/2018: Criminalized to Capitalized Social Equity Pilot Program Seeks Aspiring Cannabis Business Owners with Pass Cannabis Convictions LA TACO 07/03/2018: Cannabis City Here’s A Look At The Numbers of L.A.’s Legal Weed Industry, Six Months In And Running Late Los Angeles Times 06/08/2017: L.A. proposes new regulations on how and where marijuana shops can operate Cannabis Business Law 03/21/2017: Landmark News Los Angeles Approves Measure M! UCBA Press Release 12/09/2016: USBA Trade Association Votes to Support City of Los Angeles Sponsored Proposition M Social Equity Program Cannabis Procedures Ordinance (detailing Social Equity Program at Section 104.20)

Addendum to the Cannabis Social Equity Analysis Report Cannabis Social Equity Analysis Report Original Motion on Social Equity Program Resources City of Los Angeles Department of Cannabis Regulation Locally Authorized Businesses Contact Department of Cannabis Regulation City of Los Angeles 221 N. Figueroa St, Suite 1245 Los Angeles, CA 90012 (213) 978-0738 cannabis@lacity.org City of Los Angeles, Planning Department 200 N. Spring Street Los Angeles, CA 90012-2601 Metro Development Service Center: (213) 482-7077 Valley Development Service Center: (818) 374-5050 West Los Angeles Development Service Center: (310) 231-2598 Website: http://planning.lacity.org

Lynwood, California LIMITED OPPORTUNITY Overview Region: South Sub-region: Southland County: Los Angeles County Location: Lynwood is located near South Gate and Compton in the southern portion of the Los Angeles Basin. Lynwood is located immediately west of the I-710 and I-105 junction, divided north and south by I-105. U.S. Census Bureau Statistics Population: 71,989 (2015) Median Household Income: $43,109 (2015) Total Retail Sales: $322,250,000 (2012) Summary and Recent Developments City Council adopted Ordinance No. 1688 on December 20, 2016. This ordinance allows for the establishment of commercial cultivation and manufacturing-related businesses in Lynwood. The ordinance adds Chapter 4 Section 34 to Title 4 "Licensing and Business Regulations" of the Lynwood Municipal Code and covers the application and criteria for selection procedure, definition of terms, operational requirements, security measures, and location restrictions for cannabis businesses. This ordinance does not change the ban on medical marijuana dispensaries established by Ordinance Number 1632. On September 5, 2017, The City Council adopted Ordinance Number 1700. This ordinance makes an amendment to Chapter 4, Title 34, Section 6, to allow for “Licensed Premises” to be allowed in the City. This means that premises specified in an application to the City for a permit under Chapter 4, along with an approved development agreement by the City, shall be permitted within the City. On December 6, 2016, and again on December 20, 2016, the Lynwood City Council voted to approve an ordinance to amend the city’s zoning code and allow commercial cannabis cultivation and manufacturing in industrial zones. On September 13, 2016, the Planning Commission conducted a noticed public hearing on proposed amendments to the Lynwood Zoning Ordinance, and recommended amending the zoning district where cannabis commercial facilities are allowed, to allow such facilities only in the manufacturing zone of the City. The City of Lynwood has allowed a total five (5) licenses for either commercial cultivation and/or manufacturing, but maintains a prohibition on dispensaries. The City Manager is authorized to make policies and procedures consistent with the ordinance concerning the creation of applications, the application process, and the license selection process and procedures. A major component of the application process is the “Development Agreement” which is a mutually agreed upon set of conditions and fees between the City and applicant. Licensing Overview • The City will only provide licenses for cultivation and manufacturing. • No more than 5 licensed premises of any license type shall be allowed or maintained in the City at

any time.

• Maintains 600 foot location buffer from schools, daycare centers and youth centers and requires licensed locations be within a ‘M’ Manufacturing zone.

• Requires submission and approval of a “Development Agreement”. • No transfer, change of ownership, or change of location is allowed. • Must meet robust security requirements. Development Agreements Prior to operating in the city and as a condition of issuance of a Permit, the applicant shall enter into a development agreement with the city setting forth the terms and conditions under which the facility will operate that is in addition to the requirements of the Lynwood Municipal Code (Chapter 4), including, but not limited to:

• Public outreach and education; • Community service; • Payment of fees and other charges as mutually agreed upon; • Approval of architectural plans (including site plan, floor plan, and elevation, to conform with

manufacturing uses under the Lynwood Municipal Code); Current Laws and Regulations Ordinance Number 1688 Cannabis Chapter 4, Section 34 of the Lynwood Municipal Code Recent News ABC7 12/15/2017: Lynwood Marijuana Business Gets State Approval L.A. Daily News 12/10/16: Lynwood looks to fill gap in local supply for legal cannabis L.A. Biz Journal 12/09/16: Lynwood could soon legalize commercial marijuana manufacturing

Resources City of Lynwood Cannabis Business Application and Information

Contact

Cannabis Business Permitting Director Ebony Andersen (310) 603-0220 Ext. 252 eandersen@lynwood.ca.us

Maywood, California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland County: Los Angeles Location: Maywood is located southeast of Los Angeles. Notes: Maywood is the most densely populated city in California, and has the highest proportion of Latinos, immigrants, and undocumented immigrants in the country. U.S. Census Bureau Statistics Population: 27,888 (2015) Median Household Income: $35,582 (2015) Total Retail Sales: $107,077,000 (2012) Summary Maywood remains a top promising opportunity jurisdiction for cannabis industry opportunities. Maywood currently permits indoor and outdoor home grows; and commercial licensing for cultivation, testing laboratories, manufacturing, distribution and retail sales for both medical and adult-use cannabis.

On December 13, 2017, the City Council passed Ordinance Number 17-07 to permit commercial cultivation, testing laboratories, manufacturing, distribution, retail dispensaries and delivery for adult-use. Previously in 2017, the Council paved the way by passing supplemental ordinances to address zoning and application requirements for cannabis businesses. The current code allows the City Council to add additional license types in the future by resolution. Current code permits commercial cannabis activity in the Commercial Manufacturing [CM] and Industrial [M] zones only.

The Maywood City Council adopted Ordinance 16-03 on December 28, 2016. The ordinance amends the Maywood City Code to permit cannabis businesses in certain zones of the city. Specifically, the ordinance allows cultivation, distribution, dispensary, and product manufacturing license types in the Commercial (C), Commercial Manufacturing (CM), and Industrial (M) zones only. All applicants would need to obtain a conditional use permit from the Maywood Planning Commission, in addition to a city-issued license. The ordinance also lays out the application process for obtaining a license and other regulatory issues. Prior to the adoption of these ordinances, Maywood explicitly banned all commercial cannabis business types.

Resources City of Maywood Department of Building and Planning 4319 E. Slauson Ave., Maywood, CA 90270 Tel: (323) 562-5723 Fax (323) 773-2806 https://www.cityofmaywood.com/planning-commission Current Laws and Regulations

Maywood Municipal Code – Commercial Cannabis Activity – Title 5, Chapter 45 Resources City of Maywood Department of Building and Planning 4319 E. Slauson Ave., Maywood, CA 90270 Tel: (323) 562-5723 Fax (323) 773-2806 https://www.cityofmaywood.com/planning-commission

Orange County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: Southland Communities: Anaheim, Santa Ana, Irvine, Huntington Beach Location: Orange County is situated on the southern California coast immediately south of Los Angeles County. Special Notes: Orange County is the third most populous county in California and the sixth most populous in the United States. The county is famous for its tourism as the home of attractions like Disneyland, Knott’s Berry Farm and more than 40 miles of beaches and coastline. Orange County is home to some of the state’s largest educational campuses, including the University of California, Irvine. Santa Ana, second in size to Anaheim, is the county’s seat. Orange County is known as one of the most ‘conservative’ and wealthiest parts of the Los Angeles Metropolitan area. While Orange County is not friendly to cannabis policies locally, it is home to one of the nation’s leading voices for cannabis policy reform in Congress, Representative Dana Rohrabacher who is best known in the cannabis community for his backing of amendments to the annual appropriations bills that prevent federal interference or enforcement toward state legal operators. US Census Bureau Statistics Population: 3,169,776 (2015) Median Household Income: $76,509 (2015) Total Retail Sales: $45,193,625,000 (2012) Election Results Prop. 64 Results – Y: 548,886 (51.5%) - N: 517,298 (48.5%) Prop. 19 Results – Y: 368,952 (42.3%) - N: 503,152 (57.7%) Summary There are currently no opportunities for commercial cannabis licensing in Orange County. The County maintains a strict prohibition on all cannabis license types, Under Title 5, Article 2, Section 5-1-31 of the County Code, which applies to all unincorporated areas in the County. Most municipalities have enacted bans or taken on action to allow the cannabis industry to develop in Orange County. The City of Santa Ana being the outlier, where nearly all license types are available albeit through a stringent local approval process. Santa Ana currently permits commercial cultivation, testing laboratories, manufacturing, distribution and retail sales for medical and adult-use. The City of Irvine permits only testing laboratories, and a handful of other municipalities are conducting ongoing public discussions and study groups to consider regulations and licensing schemes however no city appears to enact positive changes in 2018. Recent News The Orange County Register 01/11/2017: Orange County considers how to regulate marijuana in unincorporated land Resources Contact

Orange County Board of Supervisors / Clerk of the Board 333 W. Santa Ana Blvd, Suite 465 Santa Ana, CA 92701 (714) 834-2206 http://www.ocgov.com/gov/bos/

Riverside County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: South Inland Cities: Riverside, Moreno Valley, Corona, Murrieta, Temecula, Jurupa Valley, Indio, Menifee, Hemet, Perris, Lake Elsinore, Eastvale, Cathedral City Special notes: Riverside County is the 4th most populous county in the state, and the 11th most populous county in the U.S. U.S. Census Bureau Statistics Population: 2,387,741 (2016) Median Household Income: $56,603 (2015) Total Retail Sales: $25,058,857,000 (2012) Election Results Prop. 64 Results – Y: 347,284 (52.4%) - N: 315,741 (47.6%) Prop. 19 Results – Y: 204,177 (42.2%) - N: 278,550 (57.8%) Summary and Recent Developments Riverside County currently prohibits all commercial cannabis activity in unincorporated areas of the county, and there are no opportunities in the foreseeable future. Riverside County remains a restrictive local setting for the cannabis industry, with the exception of a long list of municipalities within the heavily populated ‘inland’ county, that range from limited opportunities to very promising opportunities. Local Summary

• Blythe currently permits commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• Calimesa permits distribution for medical. • Cathedral City permits both indoor and outdoor home grows, and commercial cultivation,

testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• Coachella permits both indoor and outdoor home grows, and commercial cultivation, testing laboratories, manufacturing, and distribution for medical and adult-use.

• Desert Hot Springs permits both indoor and outdoor home grows, and commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• La Quintna permits distribution for medical. • Lake Elsinore permits both indoor and outdoor home grows, and commercial cultivation, testing

laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use. • Moreno Valley permits both indoor and outdoor home grows, and commercial cultivation,

testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• Palm Desert permits both indoor and outdoor home grows, and commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• Palm Springs permits both indoor and outdoor home grows, and commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use.

• Perris permits indoor home grows, and commercial cultivation, testing laboratories, and retail dispensaries for medical.

• Rancho Mirage permits both indoor and outdoor home grows, and distribution for medical and adult-use.

• City of Riverside permits commercial cultivation for medical, and testing laboratories for medical and adult-use.

• San Jacinto permits commercial cultivation, testing laboratories, manufacturing and distribution for medical and adult-use.

Currently, the county prohibits commercial cultivation, dispensaries and deliveries of both medical and adult-use cannabis in unincorporated areas of the county. Laws and Regulations Ordinance 925 Recent News CBS Local 2 03/19/2018: Marijuana regulations in focus at Riverside Supervisors meeting 09/14/16 Daily Bulletin Editorials: On marijuana policies, Riverside County doing it right Resources Contact

County Administrative Center 4080 Lemon Street Riverside, California 92501 (951) 955-1000

Cathedral City, California PROMISING OPPORTUNITY Overview Region: Southern Sub-region: Inland Location: Located between Palm Springs and Rancho Mirage, it is one of the nine cities of the Coachella Valley (Palm Springs area) in Southern California. Cathedral City has the second largest population in the Coachella Valley, after Indio. U.S. Census Bureau Statistics: Population: 54,056 (2016) Median Household Income: $39,872 (2015) Total Retail Sales: $790,127,000 (2012) Summary and Recent Developments The Cathedral City Municipal Code currently allows commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical and adult-use, in certain zones with a conditional use permit. Cathedral City has moved quicker than most other municipalities to ensure it has a place in the new legal cannabis marketplace and will likely become a cannabis industry hub in southern California and is expected to be home to some of the state’s largest licensed cultivation and manufacturing sites. There is a limit of twenty (20) dispensaries south of I-10 and a 500-foot separate requirement between dispensaries on the north side of I-10. On January 27, 2016 the Cathedral City Council adopted Ordinance numbers 772 and 773, amending the City Code to approve and adopt regulations for, various medical cannabis license types. The City Council has since adopted regulatory and zoning revisions to the municipal code and is expected to soon begin discussions regarding licensing for adult-use businesses, distribution, and transportation. Taxes On November 4, 2014, the Cathedral City voters approved Measure N, which approved a new tax at a rate of up to fifteen cents per each dollar of proceeds or fractional part thereof on marijuana collectives and dispensaries operating in the City of Cathedral City. On November 8, 2016, the Cathedral City voters approved Measure P, amending the existing Cannabis Business Tax to impose the Tax on all cannabis businesses and to provide different tax calculations for cultivating, manufacturing and dispensing cannabis. A cannabis collective means any activity regulated or permitted by Chapter 9.108 of the Cathedral City Municipal Code, or California Health and Safety Code sections 11362.5, or any other activity or business that involves planting, cultivating, harvesting, transporting, dispensing, delivering, providing, manufacturing, compounding, converting, processing, preparing, storing, packaging, or testing any part of the marijuana plant. Every cannabis business operating in the city, regardless of whether such cannabis business has a license pursuant to Chapter 5.88 or a permit pursuant to 9.108 of the City of Cathedral City Municipal Code, shall pay a cannabis and marijuana tax. On April 26, 2017, Resolution 2017-13 was approved pursuant to

Section 3.48.040 of the City of Cathedral City Municipal Code, requiring payment of Cannabis and Marijuana tax in the following amounts:

• Ten cents for each dollar of gross receipts* or fractional part thereof received by a dispensary or by any other cannabis business for activities other than cultivation or manufacturing.

• Fifteen dollars for each square foot or fractional part thereof of cannabis cultivation space. • Forty cents for each gram of cannabis concentrate produced or manufactured. • Forty cents of each cannabis-infused product other than cannabis concentrate produced or

manufactured and packaged or intended for individual sale. *Gross receipts (proceeds) of any kind, including without limitation, membership dues; the value of in-kind contributions; reimbursements provided by members regardless of form; any payments made; and anything else of value obtained by a cannabis or marijuana collective. Depending on the type of cannabis business operating in the City of Cathedral City, there can be up to three different Cannabis and Marijuana Tax (CMT) returns filed each month:

• Dispensary Cannabis and Marijuana Tax (CMT) Return • Cultivation Cannabis and Marijuana (CMT) Tax Return • Manufacturing Cannabis and Marijuana Tax (CMT) Return

Laws and Regulations: Ordinance Number 800 Ordinance Number 801 Ordinance Number 802 Title 5, Chapter 5.88 - Medical Cannabis Businesses Title 9, Division III, Chapter 9.108 - Medical Cannabis Businesses Ordinance No. 772 Adding Section 5. 88 of the Cathedral City Municipal Code Relating to Medical Cannabis Ordinance No. 773 Adopting Land Use Regulations Governing the Sale and Cultivation of Medical Cannabis Ordinance No. 774 Amending Sections 9. 08, 9. 30, 9.36, 9.40, 9.42, 9. 108 of the Cathedral City Municipal Code Relating to Medical Cannabis Ordinance No. 775 Amending Sections 3.48, 5.88, 13. 80 of the Cathedral City Municipal Code Relating to Medical Cannabis Ordinance 742 Cannabis and Marijuana Tax, $.15 maximum tax Recent News:

The Desert Sun 04/26/2017: Cathedral City lowers taxes on medical marijuana cultivation, sets other rules CBS Local 2 02/22/2017: Cathedral City explores expansion of marijuana cultivation Resources: Contact

Cathedral City Business Licensing 68700 Avenida Lalo Guerrero Cathedral City, CA 92234 (760) 770-0340 http://www.cathedralcity.gov/business/cannabis

San Bernardino County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: Southland Communities: San Bernardino, Fontana, Rancho Cucamonga, Ontario, Victorville, Rialto, Chino Hills, Apple Valley, Redlands, Grand Terrace. Location: San Bernardino County is the fifth-most populous county in California. It is included in the Riverside-San Bernardino-Ontario, CA Metropolitan Statistical Area, also known as the Inland Empire, as well as the Los Angeles-Long Beach, CA Combined Statistical Area. It is the largest county in the United States by area, larger than each of the nine smallest states and 70 different sovereign nations. The deserts and mountains of this vast county stretch from where the bulk of the county population resides in two Census County Divisions, south to the San Bernardino Mountains in San Bernardino Valley, and east to the Nevada border and Colorado River. U.S. Census Bureau Statistics Population: 2,128,133 (2015) Median Household Income: $53,433 (2015) Total Retail Sales: $24,380,486,000 (2012) Election Results Prop. 64 Results – Y: 308,836 (51.9%) - N: 285,851 (48.1%) Prop. 19 Results – Y: 181,173 (41.6%) - N: 253,778 (58.4%) Summary and Recent Developments San Bernardino County currently prohibits all commercial cannabis activity in unincorporated areas of the County, and there are no opportunities in the foreseeable future. San Benito County is a restrictive local setting for the cannabis industry, with the exception of a handful of local municipalities that permit various cannabis businesses. Namely, the City of San Bernardino, one of the largest cities in the region, where voters have approved numerous cannabis business initiatives and currently permit two (2) retail dispensaries, and licensing for commercial cultivation, testing laboratories, manufacturing and distribution for medical and adult-use. In addition, the City of Adelanto permits commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical. Colton permits commercial cultivation and testing laboratories for adult-use. Needles permits commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical.

San Bernardino County has been home to several notable cannabis cultural events, including the High Times Cannabis Cup and Chalice Festival. Despite hosting cannabis friendly events and having several municipalities that are moving toward approving and regulating commercial cannabis businesses, the County maintains a strict ban on commercial cannabis activity in unincorporated areas of the County and the events have recently been rejected by the County and has resulted in court action. San Bernardino County has been one of the most difficult governments to navigate regarding medical cannabis prohibition and regulations, despite a significant amount of interest from locals and outside investors.

As of August 23, 2016, the County Board of Supervisors adopted an ordinance banning commercial cannabis activity in the unincorporated areas of San Bernardino County. The County maintains a “Medical Marijuana Identification Care” program to identify and verify patient and caregiver cards and allows patients and caregivers to maintain small home grows, up to 24 plants total at any on residential property. Laws and Regulations Municipal Code Chapter 84.34 - Commercial Cannabis Activity Land Use and Zoning Requirements With exception to personal use and licensed healthcare facilities, in no event shall commercial cannabis activity be considered a permitted or conditionally permitted use in any land use zoning district in unincorporated San Bernardino County. Commercial cannabis activity, including delivery, is prohibited in all land use zoning districts, as those may be amended from time to time, and therefore no permit of any type shall be issued. Recent News The Press Enterprise 08/23/16: Why San Bernardino County voted to ban marijuana The Sun (Marijuana) 08/23/16: San Bernardino County votes to ban pot, even if state allows it Resources San Bernardino County Cannabis Frequently Asked Questions

Contact

San Bernardino County Board of Supervisors 385 N. Arrowhead Avenue San Bernardino, CA 92415 (888) 818-8988 www.sbcounty.gov/bos/

Adelanto, California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland/Inland Empire County: San Bernardino Location: Adelanto is a city in San Bernardino County about 102 miles Northeast of Los Angeles. It is about 9 miles northwest of Victorville in the Victor Valley area of the Mojave Desert, known as the northern region of the Inland Empire. The Inland Empire (I.E.) is a metropolitan area and region in Southern California, and generally refers to the cities of western Riverside County and southwestern San Bernardino County. A generally broader definition will include eastern Los Angeles County cities in the Pomona Valley, and/or the desert community of Palm Springs as well as its surrounding area; a much larger definition will include all of San Bernardino and Riverside counties. Adelanto has 56 square miles of total land area. Special Notes: The U.S. Census Bureau-defined Riverside-San Bernardino-Ontario metropolitan area, which comprises Riverside County and San Bernardino County, California, covers more than 27,000 square miles and has a population of approximately 4 million. Most of the area's population is located in southwestern San Bernardino County and northwestern Riverside County. Historically Adelanto was a fruit-growing town and formerly home to the George Air Force Base which closed in 1992. The city has since struggled economically, so the city government approved the construction and welcomed two private prisons, and has been home to several prisons over the past two decades. As of 2016, commercial cannabis cultivation has become a possible new economic driver for the city. U.S. Census Bureau Statistics Population: 33,166 (2015) Median Household Income: $33,298 (2015) Total Retail Sales: $80,820,000 (2012) Summary and Recent Developments Adelanto permits commercial indoor cultivation and manufacturing in industrial areas, as well as transportation and testing facilities, and only allows a limited number dispensaries. Adelanto was one of the first cities in California to pass an ordinance to authorize commercial medical cannabis cultivation in November 2015, and has since worked to improve its ordinances and work with local land developers, gradually expanding the permitted areas. It is estimated that more than 30 licenses have by issued by the city so far. However, the City has unexpectedly not pursued adult-use licensing despite a lot of anticipation built up from the city’s actions prior to the passage of Proposition 64. Voters in Adelanto approved Measure R on the ballot in the November 8, 2016 election with nearly 68% in support, to impose an excise taxes on each commercial cannabis business licensed and operating in the City, in an amount of not more than 5% of the gross revenue attributable to revenue earned within the City. On May 25, 2016 the Adelanto City Council approved Ordinance Number 545, replacing section 17.80.080 (Cultivation of Medical Marijuana), and added Section 17.80.090 (Manufacturing of Medical Marijuana) to the Adelanto Municipal Code. Since the passage of Ordinance number 545, the Planning Commission and City Council has continued to update the medical cannabis ordinances by considering

additional land use designations to expand the amount of land available for cultivation or manufacturing facilities and has set various fee amounts. Licensing Overview All: • The City Manager has the full authority to vet and select applicants to be issued permits, and will

screen applicants based on their operations and security plans, experience and capital. • There is no set cap on the number of licenses available, however the city has strict industrial zoning

requirements which the Mayor said in public forum, is likely to limit the number of facilities to eight total anyways.

• Manufacturing and Cultivation licenses may be maintained in the same building or structure only if they are located in separate rooms with their own separate entrances.

• A minimum of 50% of all employees at a cultivation facility shall be residents of Adelanto. Cultivation • The only permitted license types under MCRSA to be allowed in the City are: 1A, 1B, 2A, 2B, 3A, 3B

and 4. Manufacturing • The only permitted license type under MCRSA to be allowed in the City is a classification type 6 level

1 with only nonvolatile solvents. Current Laws and Regulations Adelanto California Municipal Code, Title 17 – Zoning Ordinance, Chapter 17.80 – Special Use Standards, Section 50 Medical Marijuana Dispensaries Adelanto California Municipal Code, Title 17 – Zoning Ordinance, Chapter 17.80 – Special Use Standards, Section 80 Cultivation of Medical Marijuana Adelanto California Municipal Code, title 17 – Zoning Ordinance, Chapter 17.80 – Special Use Standards, Section 90 Manufacturing of Medical Marijuana Land Use and Zoning Requirements Indoor medical cannabis cultivation is a conditionally permitted use only on properties within the Manufacturing/Industrial (MI) zoning designation in the Industrial Park (“Cultivation Zone”). Indoor medical cannabis manufacturing is a conditionally permitted use only on properties within the Manufacturing/Industrial (MI) zoning designation in the Industrial Park (“Manufacturing Zone”). In addition, no medical cannabis cultivation shall be established, developed, or operated within 2,500 feet of a school, public playground or park, child care or day care facility, youth center, or church. Local Taxes Adelanto imposes a 5% excise tax on all wholesale cannabis revenue generated in the city. Recent News Daily Press 09/26/2017: Adelanto Cannabis Dispensary Licensees List of Familiar Names CNBC 04/14/16: A push to create the next great American marijuana town

Orange County Register 02/14/16: Prison town goes to pot – Desert city Adelanto hopes cultivating marijuana will save it Desert Dispatch 11/24/15: Adelanto’s Medical Marijuana Ordinance Passes Resources Contact

Adelanto Planning Department 11600 Air Expressway Adelanto, CA 92301 (760) 246-2300 City of Adelanto Planning Department Medical Marijuana Cultivation Application and Business Checklist: http://www.ci.adelanto.ca.us/index.asp?SEC=A2A2C85D-F355-41C6-81C5-8D3305EC5BBE&Type=B_BASIC Policy Advocates

City Councilman John “Bug” Woodard Jr. Phone: (760) 246-2300 jwoodard@ci.adelanto.ca.us

San Bernardino (City), California PROMISING OPPORTUNITY Overview Region: South Sub-region: Southland/Inland Empire County: San Bernardino Location: San Bernardino is located in the Riverside-San Bernardino metropolitan area (commonly referred to as "Inland Empire"). San Bernardino spans 81 square miles on the floor of the San Bernardino Valley, approximately 60 miles east of Los Angeles. Special Notes: San Bernardino serves as the county seat of San Bernardino County. As one of the Inland Empire's anchor cities, San Bernardino is the 17th-largest city in California, and the 100th-largest city in the United States. San Bernardino is home to numerous diplomatic missions for the Inland Empire, being one of four cities in California with numerous consulates (the other three being Los Angeles, San Diego and San Francisco). The governments of Guatemala and Mexico have established their consulates in the downtown area of the city. California State University, San Bernardino is located in the northwestern part of the city. Other attractions include ASU Fox Theatre, the McDonald's Museum, which is located on the original site of the world's first McDonald's, California Theatre, the San Bernardino Mountains, and San Manuel Amphitheater, the largest outdoor amphitheater in the United States. U.S. Census Bureau Statistics Population: 216,108 (2015) Median Household Income: $37,047 (2015) Total Retail Sales: $2,610,442,000 (2012) Summary and Recent Developments The City of San Bernardino has become a top promising opportunity jurisdiction for cannabis industry opportunities. San Bernardino currently permits indoor home grows; and commercial licensing for cultivation, testing laboratories, retail sales, manufacturing and distribution for both medical and adult-use cannabis. On March 7, 2018, the City Council adopted Ordinance MC-1464 allowing and regulating medical and adult-use cannabis retail sale, delivery, cultivation (indoor and mixed-light only), manufacturing (volatile and non-volatile), distribution, and testing. The total number of permits to be issued for all commercial cannabis activities is capped at one per 12,500 residents. The commercial cannabis activities are permitted on property zoned CG (Commercial General), CG -2 (Commercial General-2), CG-3 (Commercial General -3), CR2 (Commercial Regional-Downtown), CR-3 (Commercial-Tri-City-Club), CCS-1 (Central City South), CCS-2 (Central City), CH (Commercial Heavy), IL (Industrial Light), IH (Industrial Heavy), OIP (Office Industrial Park) and must meet all of the requirements for development in these zones Voters in San Bernardino approved Measure N on the ballot in the November 8, 2016 election, the “Medical Cannabis Restrictions and Limitations Act”, by a slim margin of just 51.1% in support, which regulates medical cannabis businesses in the City of San Bernardino. Measure N, was proposed by citizens' petition, and two other measures were placed on the ballot but rejected by voters, another by citizens' petition, and another referred by City Council.

Ballot measure N amended Chapter 5.05, added Chapter 5.44, Section 5.44.050 and deleted chapter 19.06.026 (medical cannabis dispensaries prohibited), to regulate medical cannabis businesses by establishing a regulatory permit process. The new ordinance establishes a registration system and would require the City to grant permits meeting the requirements of the measure. If there at least twenty applicants, the City will be required to grant at least twenty permits. The Mayor and Common Council is authorized to establish fees to cover the cost of implementing the provisions of the ballot measure. The proposition would also establish a tax of five percent (5%) on gross receipts. Licensing The most recent application window for cannabis businesses was opened April 23, 2018 and will close June 25, 2018. A maximum of 17 license/permits will be issued citywide. The 17 may include a combination of Cultivation, Distribution, Manufacturing, Microbusiness, Retail and Testing license types not to exceed five per type. If all 17 licenses are not issued in the first round, the City will open a second round at a future date. Applicants will be evaluated based on criterion outline in Municipal Code Chapter 5.10.090. There is a four phase review process:

• Phase 1: Determination of eligibility of owner and completeness of application • Phase 2: Initial evaluation of Commercial Cannabis Business application – comparison to

industry standards • Phase 3: Interview and second ranking of applications – determine best fit within the City • Phase 4: Mayor and City Council public hearing and award of CCB applications.

Laws and Regulations Ordinance MC-1464 San Bernardino City Code Chapter 5 Recent News The Sun 06/20/2018: San Bernardino city leaders to ponder how to tax marijuana The Sun 04/16/2018: San Bernardino again is sued over its marijuana laws Canna Law Blog 07/08/16: San Bernardino Will (Finally) Vote on Cannabis Regulation The Sun (Editorial) 07/06/16: San Bernardino takes better approach to medical marijuana Resources San Bernardino Cannabis Business Licensing Website Contact

San Bernardino Community Planning Department 201 North E St Third Floor San Bernardino, CA 92401 (909) 384-5357 http://www.sbcity.org/cityhall/community_development/default.asp

San Diego County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: Far South Communities: San Diego, Chula Vista, Oceanside, Escondido, Carlsbad, El Cajon, Vista, San Marcos, Encinitas, National City, La mesa, Lemon Grove, Coronado, Del Mar, Solana Beach Location: With more than 70 miles of Pacific coast line, San Diego County is located in the southwestern corner of California. As of the 2010 Census, San Diego County was the 2nd most populous county in California, and the 5th most populous county in the United States. San Diego County comprises the San Diego-Carlsbad Metropolitan Statistical Area, which is the 17th most populous metropolitan statistical area and the 18th most populous primary statistical area of the United States as of July 1, 2012. San Diego is also part of the San Diego–Tijuana metropolitan area, the largest metropolitan area shared between the United States and Mexico. Greater San Diego ranks as the 38th largest metropolitan area in the Americas. San Diego County has a total of 4,525 square miles of area. U.S. Census Bureau Statistics Population: 3,299,521 Median Household Income: $64,309 Total Retail Sales: $39,786,069,000 Election Results Prop. 64 Results – Y: 576,081 (55.9%) - N: 453,996 (44.1%) Prop. 19 Results – Y: 426,807 (47.1%) - N: 478,552 (52.9%) Summary and Recent Developments San Diego County currently prohibits all commercial cannabis activity in unincorporated areas of the county, and there are no opportunities in the foreseeable future. San Diego County is a fairly restrictive local setting for the cannabis industry, with the exception of the City of San Diego which permits commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for both medical and adult-use. On March 5, 2017 the San Diego County Board of Supervisors banned medical and adult-use cannabis facilities within the unincorporated areas of the county in a 3-2 vote. The proposed zoning changes will cause three existing medical cannabis collective facilities and two other vested facilities to cease operations within five years. The board also voted 4-1 to extend the moratorium on the establishment of medical cannabis collective facilities. Despite county bans in place, some local municipalities have passed their own regulations for medical cannabis businesses and are considering expanding to adult-use. Laws and Regulations Title 2, Division 1, Chapter 25 - Medical Marijuana Zoning Ordinance, Part 6, Section 6935 - Medical Marijuana Collective Facilities Recent News Del Mar Times 03/23/2017: San Diego County bans marijuana dispensaries

Resources Contact

San Diego County Board of Supervisors (858) 694-3900 http://www.sandiegocounty.gov/general/bos.html

La Mesa, California LIMITED OPPORTUNITY Overview Region: South Sub-region: Far South County: San Diego County Location: La Mesa is part of the San Diego metropolitan area, located directly northeast of the city. The city has a total area of just 9.1 square miles. U.S. Census Bureau Statistics Population: 60,089 (2015) Median Household Income: $54,667 (2015) Total Retail Sales: $1,070,326,000 (2012) Summary and Recent Developments As a result of a 2016 ballot initiative, La Mesa permits a limited number of cannabis businesses, including commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for medical only. The only limit on the number of licenses issued is through geographic restrictions within the small city’s boundaries. Despite city official’s expectations, only 14 dispensary applications, and one for cultivation and manufacturing each, were submitted by the end of the first day. The city will likely permit adult-use businesses as well, but has not yet enacted regulations for expanding to adult-use. La Mesa began accepting applications for medical cannabis dispensary licenses on February 6, 2017, three months after voters approved Measure U with nearly 53% of the vote. Measure U also created new permit requirements for commercial cultivation sites to be located in industrial and manufacturing zones. While Measure U is limited to medical cannabis, support for AUMA was high among La Mesa voters and City officials have expressed their desire to focus on rolling out the new medical cannabis rules before pursuing policy changes regarding adult-use. The issue is not expected to be taken up until later in 2018, or possibly 2019 at the soonest. Current Laws and Regulations Measure U – Repeal Ban on Medical Marijuana Dispensaries Initiative History La Mesa rejected a ballot measure in 2012 and chose instead to ban the dispensing, cultivation and manufacturing of medical cannabis. Recent News San Diego Union-Tribune 02/28/2018: La Mesa to award license to first medical pot dispensary San Diego Union-Tribune 09/27/2017: La Mesa explains stance on pot, closes illegal store San Diego NBC 7 01/10/2017: City of La Mesa Announces New Rules for Medical Marijuana Businesses KPBS News 02/06/2017: La Mesa Opens Doors to Medical Marijuana

Resources Measure U Ordinance Measure U/Medical Marijuana FAQs - 1/18/2017 FAQs - 1/26/2017 FAQs - 3/17/2017 Illegal Dispensaries - Shut Down Interactive Medical Marijuana Sites Map Contact

City of La Mesa Planning Department 8130 Allison Ave La Mesa, CA 91942 (619) 667-1177 http://www.cityoflamesa.com/1425/Measure-U-Medical-Marijuana

San Diego (City), California POTENTIAL OPPORTUNITY Overview Region: South Sub-region: Far South County: San Diego County Location: San Diego is located on the far south Pacific coast in California, approximately 120 miles south of Los Angeles and immediately adjacent to the border with Mexico. San Diego is the 2nd most populous city in California, and the 8th most populous city in the United States. U.S. Census Bureau Statistics Population: 1,394,928 (2015) Median Household Income: $65,753 (2014) Total Retail Sales: $ 39,786,069,000 (2012) Summary and Recent Developments San Diego is a unique opportunity because it is the most populous city in the county and region, but it is also the first major city in the county and region to authorize a tax on retail cannabis, and has moved more quickly than San Francisco and Los Angeles, other major rivals, to roll out licensing for adult-use businesses. Most surrounding cities have passed ordinances to ban adult-use dispensaries, making San Diego a likely retail hub for the entire region. However; there remains strong political opposition and a divide in the community, stemming from ongoing tension between public officials in the City of San Diego who tend to lean favorable to cannabis, and the Board of Advisors for the County of San Diego who tend to lean oppositional. One change in office at a local election could jeopardize the local policies that have been established. In 2017, the City introduced amendments to the Land Development Code to include regulations that will allow “Marijuana Outlets”, or retail dispensaries for medical and adul-tuse, operating with a Conditional use Permit. Marijuana Outlets may be approved with a Process Three CUP and are limited to no more than four per Council District, 36 citywide. An outlet with a City of San Diego issued permit would be allowed to sell both medical and adult-use cannabis. The 15 previously approved Medical Marijuana Consumer Cooperatives (MMCC) would streamlined for licensure under the new program. Ordinance Number O-20793, adopted in February 2017, approved amendments to the Land Development Code and the Local Coastal Program and replaced the MMCC use with a new retail sales use, called a Marijuana Outlet (Outlet). It became effective on April 12, 2017 in areas of the City of San Diego outside of the Coastal Overlay Zone, and became effective on Oct. 12, 2017 within the Coastal Overlay Zone. Ordinance Number O-20859 was adopted in September 2017 to regulate commercial cultivation, testing laboratories, manufacturing and distribution for medical and adult-use. On Nov. 8, 2016, San Diego voters passed Measure N, Non-Medical Cannabis Tax, which imposes a gross receipts tax on non-medical cannabis businesses that operate or provide services within the City of San Diego. The Cannabis Business Tax applies to non-medical cannabis business activities including but not limited to, transporting, manufacturing, cultivating, packaging, or retail sales. Businesses will be taxed initially at a rate of 5 percent of monthly gross receipts and will increase to 8 percent on July 1, 2019

unless City Council, by ordinance, acts to set a different tax rate, not to exceed 15 percent of gross receipts. For additional information visit the Cannabis Business Tax web page. History San Diego has had a frustrating history with regulating medical cannabis dispensaries, having to overcome significant community divide and multiple initiatives in order to finally approve medical cannabis dispensaries. In addition, up to 40 unregulated, non-licensed medical cannabis storefronts have been reported, and while some of them have been shut down, it has been a challenging issue for the city to enforce. There is still a strong opposition in the community, but public officials and the current medical cannabis industry have proven to successfully regulate and operate with few problems. There also seems to be a historic divide on this issue between the city of San Diego and the board of advisors for the County of San Diego. In the 2016 election, the city of San Diego approved ballot Measure N, which applies a 15% sales tax on all cannabis sold at retail dispensaries. Measure N amends the San Diego Municipal Code by adding a new Article 4 to Chapter 3 to allow the city to impose the tax. Since the passage of Proposition 64 which legalized adult-use cannabis statewide, and the passage of Measure N locally, the City Council has moved forward quickly with a proposal to allow adult-use sales in the city, potentially making it the first city in the state to sell and tax adult-use cannabis. There is not yet at this time, any proposals to authorize the licensing of cultivation or manufacturing or any other license types. On December 15, 2016, City Planning Commissioners voted unanimously to forward the proposed regulations for retail sails onto City Council, who made final revisions and determinations before ultimately approving the new ordinance in early 2017. While the adopted regulations allow sales of adult-use cannabis, they prohibit commercial cultivation, processing, storage and testing. They also ban delivery services that are not tied to a licensed storefront dispensary. Commissioners recommended the City Council eliminate the prohibitions and craft a new ordinance that would allow for separate licensing of delivery-only services. In March 2014, the City and County approved a package of zoning and operating restrictions for medical cannabis facilities. The new package includes a requirement to obtain a conditional-use permit from the city (good for 5 years), and an annual public safety permit from the San Diego Police Department. In addition, the package requires that dispensaries not be within 1,000 feet of public parks, churches, residential care facilities, schools and other dispensaries, and not be within 100 feet of residential zones. Dispensaries are also barred from having on-site medical professionals, preventing the “one stop shop” for doctor recommendations. Lastly, the primary component of these regulations limit the number of medical cannabis dispensaries to 4 storefronts per Council district. Laws and Regulations Ordinance Number O-20793 - Relating to Marijuana Outlets Ordinance Number O-20858 - Relating to Marijuana Production Facilities and the distribution and transport of marijuana and marijuana products Ordinance Number O-20859 - Relating to testing and marijuana production facilities San Diego Municipal Code, Chapter 4 Health and Sanitation, Article 2 Health Regulated Business and Activities, Division 15 Medical Marijuana Consumer Cooperatives

Local Taxes On November 8, 2016, San Diego voters passed Measure N, Non-Medical Cannabis Tax, which imposes a gross receipts tax on non-medical cannabis businesses that operate or provide services within the City of San Diego. The Cannabis Business Tax Ordinance, now San Diego Municipal Code (SDMC) Chapter 3, Article 4, Division 1, adopted by City Council by Resolution Number 310869, became effective on December 12, 2016. The Cannabis Business Tax applies to non-medical cannabis business activities including but not limited to, transporting, manufacturing, cultivating, packaging, or retail sales. Businesses will be taxed initially at a rate of 5% of monthly gross receipts and will increase to 8% on July 1, 2019 unless City Council, by ordinance, acts to set a different tax rate, not to exceed 15% of gross receipts. Each business is required to remit monthly the full amount of taxes owed based on previous month activity. Along with payment of taxes, businesses must file a Cannabis Tax Remittance Form. Recent news 12/15/16 KPBS: San Diego Advances Recreational Pot Shop Rules 12/08/16 San Diego Union-Tribune: Med pot shops could sell recreational marijuana under proposal 11/17/16 KPBS: San Diego to Consider Temporary Ban on Growing Marijuana Outdoors 11/17/16 Fox 5 San Diego: SD Council says ‘wait a second’ to recreational pot 11/07/16 San Diego Union-Tribune: San Diego preparing to allow recreational pot shops 10/27/16 San Diego Union-Tribune: Cities pass emergency laws against recreational pot Resources Cannabis Tax Frequently Asked Questions Contact

Office of the City Treasurer Cannabis Business Tax San Diego Development Services Cannabis Business Licensing Division Development Services Department 1222 First Ave., MS 301 San Diego, CA 92101-4101 San Diego Development Services Cannabis Business Licensing Division City Administration Building 202 C Street, 10th Floor San Diego, CA 92101 https://www.sandiego.gov/citycouncil Local Policy Advocates

United Medical Marijuana Coalition http://www.unitedmmjcoalition.com Phil Rath, Executive Director (619) 993-3755 University of California, San Diego Center for Medicinal Cannabis Research http://www.cmcr.ucsd.edu/

Ventura County CHALLENGING OPPORTUNITY Overview Region: South Sub-region: South Communities: San Buenaventura (Ventura), Oxnard, Simi Valley, Thousand Oaks, Port Hueneme Location: Ventura County lies on the coast of California directly north of Los Angeles County. The county comprises the Oxnard-Thousand Oaks – Ventura County metropolitan statistical area, which is also included in the Los Angeles-Long Beach combined statistical area. It is considered as the southernmost county along the California Central Coast. U.S. Census Bureau Statistics Population: 850,536 (2015) Median Household Income: $77,348 (2015) Total Retail Sales: $11,194,185,000 (2012) Election Results Prop. 64 Results – Y: 170,959 (55%) - N: 64,295 (45%) Prop. 19 Results – Y: 117,271 (45%) - N: 142,844 (55%) Summary Ventura County currently prohibits all commercial cannabis activity in unincorporated areas of the county, and there are no opportunities in the foreseeable future. Ventura County is potentially one of the most restrictive local settings for the cannabis industry, with the exception of the City of Port Hueneme which permits both indoor and outdoor home grows, commercial cultivation, testing laboratories, manufacturing, distribution and retail dispensaries for both medical and adult-use. In addition, the Cities of Ojai and Thousand Oaks allows a limited number of dispensaries for medical.

The Ventura County Board of Supervisors met on December 6, 2016, to receive and file reports on Proposition 64, and outline a draft of medical cannabis regulations for Ventura County. Currently, the County has not codified any zoning or regulatory language outside of the subject of medical cultivation. Recent News KEYT 11/06/2017: First medical marijuana shop opens in Ventura County Ventura County Star 02/02/2016: Age 25 to Buy Pot? Ventura County Health Chief Hopes So Resources Contact

County of Ventura, Board of Supervisors 800 S. Victoria Ave Ventura, CA 93009 (805) 654-5000 http://www.ventura.org/board-of-supervisors

Port Hueneme, California POTENTIAL OPPORTUNITY Overview Region: South Sub-region: Far South County: San Diego County U.S. Census Bureau Statistics Population: 22,423 (2015) Median Household Income: $57,848 (2015) Total Retail Sales: $89,853 (2012) Summary and Recent Developments Port Hueneme currently allows commercial cultivation, manufacturing, testing laboratories, retail dispensaries and delivery services for medical and adult-use cannabis, addressing medical upon passage of Ordinance 727 on June 5, 2017, and later addressing adult-use upon passage of Ordinance Number 734. A ban was passed in 2016 as a temporary measure to ensure that the city maintained local control over licensing of cannabis establishments before the passage of Proposition 64, but the City has since taken proactive steps to regulate the cannabis industry. On December 18, 2017 the City Council adopted Ordinance Number 734 to permit and regulate adult-use cannabis sale, delivery, cultivation (no outdoor), manufacturing (volatile and non-volatile), distribution, and testing. No licenses for adult-use commercial cannabis facilities will be issued within the first six months after the effective date of the ordinance, unless City Council shortens or terminates this period by resolution. The Port Hueneme City Council finalized the creational of the Cannabis Exploratory Ad-Hoc Committee at their December 5, 2016 meeting. The committee is tasked with assessing regulations and developing an ordinance addressing adult use and commercial cannabis permits in the city. The first draft, intended to revise an existing ordinance created by the committee, was presented in January 2017, and committee members offered their opinions on the language of the draft. Ultimately, the committee decided to direct staff to revise the draft ordinance so the council can decide how many dispensaries it wants to allow; whether cannabis should be taxed using the existing tax schedule or a new tax measure be adopted and voted on; guidelines for indoor cultivation and manufacturing, including a provision prohibiting solvent manufacturing; and hours of operation. This ordinance was adopted as Ordinance 727 on June 5, 2017. Current Laws and Regulations Final Approved Ordinance (June 5, 2017) Final Approved Implementing Resolution No. 4178 (June 19, 2017) Final Approved Adult Use Ordinance (December 18, 2017) Port Hueneme Municipal Code – Article X, Chapter 2, Part F Recent News

Digital Journal 07/06/2018: Hueneme Patient Collective to become Ventura County’s first recreational cannabis dispensary VC Star 07/01/2018: Port Hueneme City Council to consider putting sales tax increase on November ballot VC Star 02/11/2018: Port Hueneme’s marijuana industry has left the gate Ventura County Star 01/18/2017: Port Hueneme Starts Crafting Marijuana Dispensary Laws Resources Application Documents Zoning Map Contact

City of Port Hueneme 250 North Ventura Road Port Hueneme, CA 93041 cannabis (805) 986 - 6500 http://www.ci.port-hueneme.ca.us/index.aspx?NID=1050