INTRODUCTION

APARNA GULAVANE

SENIOR QUALITY AND REGULATORY CONSULTANT

Aparna@cannabiscomplianceinc.com

WHO IS CCI?

CCI is a global consulting firm with subject matter expertise in the regulated

consumer products industry

• A legacy of success based on knowledge of safety and compliance best practice

• Fifteen years of licencing and regulatory expertise

• Successful completion of over 66,000 licences

• The original consulting company in Canada to offer a breadth of cannabis services (Licensing, QAP recruitment, development of PCPs, Workforce Training, Audits)

• A proud Canadian company with a global presence in more than 25 countries around the world

AGENDA

• History of cannabis regulations.

• Cannabis, Hemp and Cannabinoids

• Challenges and restrictions.

• Roadmap to licensing.

• Good Production Practices

HISTORY OF CANNABIS REGULATIONS

Licence Regulations Act Dates

Licenced Producer (LP) MMPR Controlled Drug and Substances Act

31 March 2014 – 23 Aug 2016

LP ACMPR Controlled Drug and Substances Act

24 Aug 2016 – 16 Oct 2018

Licence for Controlled Drugs and Substances (DL)

Narcotic Control Regulations

Controlled Drug and Substances Act

Until 16 Oct 2018

Different types of cannabis licences (LH)

Cannabis Regulations Cannabis Act, Food and Drugs Act

17 Oct 2018 to present

Cannabis Drug Licence (CDL)

Cannabis Regulations Cannabis Act, Food and Drugs Act, Drug and Substances Act

17 Oct 2018 to present

Industrial Hemp Licence (IHL)

Cannabis Regs Industrial Hemp Regs

Cannabis Act 17 Oct 2018 to present

CANNABIS vs HEMP

Cannabis:

• Schedule 1 of the Cannabis Act defines what is cannabis

• Schedule 2 of the Cannabis Act defines what isn’tcannabis

• Schedule 2 encompasses “industrial hemp” and also cannabis waste/byproducts

• Cannabis sativa, Cannabis indica, Cannabis ruderalis, and hybrids

• Historic medical and recreational uses for cannabis

CANNABIS vs HEMP

Hemp

• Cannabis plants – or any part of these plants - containing less than 0.3% THC in the leaves and flowering heads

• Cultivars must be on Health Canada’s list of approved cultivars (LOAC)

• Traditional uses for hemp:

• Fiber (rope, canvas)• Textiles (clothing, carpeting)• Construction (varnishes, fibreboard)• Food (grain, oil, protein powder)• Cosmetic (soaps, lotions)• Paper

CANNABINOIDS

• There are over 85 known cannabinoids

• THC ,CBD, CBG and CBN are common cannabinoids currently sought after.

• THC is the only cannabinoid resulting in euphoric effects.

• All cannabinoids are in acidic form within the plant.

• A process called decarboxylation transforms the molecule from acidic form to non acidic form making them absorbable by the human body.

• Cannabinoids are produced in the trichomes of the plant (flowers, leaves)

• Cannabinoid profile is affected by maturity of the plant, similar to how sugar

development in apples changes throughout the growing season

• Maturity will affect the cannabinoid concentration as well as the medicinal effects• Early maturation has less sedative effects and more energetic effects compared to

more advanced maturation.

THCA + = THC

Edibles

THE CHALLENGES NEW PROCESSES

“It’s a complex area with

greater risk, because of the

way in which it’s consumed. We said we’re going to take the time

to do it right”

Product Development

Personnel

Facilities

Ingredient

Track and Trace

Manufacturing Processes

Labelling & Packaging

R&D

- Bill Blair

CHALLENGES

• Major concerns are food safety; preventing foodborne illnesses, accidental and overconsumption; and protection of our export markets.

• Recognize delayed onset effects of ingested cannabis compared to inhaled cannabis.

• Concerns of allergen cross contamination from ingredients

Substance or mixture of substances (i.e. products) containing cannabis that are intended to be consumed in the same

manner as food

RESTRICTIONS

• Requirements in accordance with the Safe Food for Canadians Act and Regulations. PCP required.

• Can’t manufacture edible cannabis products in the same facility (building) as conventional food products

• No health or cosmetic benefit claims –these are recreational products only

• Must not represent edible cannabis as being a suitable means of meeting dietary requirements

Requirements related to site, product, claims and labelling have been put in

place.

RESTRICTIONS

The use of certain claims, terminology, logos, and manufacturing processes are

prohibited

• Prohibition on all representations that associate cannabis products with alcohol:

o No use of the terms “beer” or “wine”

o No use of company name or logo that manufactures alcoholic beverages

• Must not appeal to youth.

• Packaging restrictions.

• Must not be fortified with vitamins and minerals.

• Caffeine as an additive is not allowed unless it is naturally occurring (max 30 mg/pk)

• May contain up to 0.5% w/w of ethyl alcohol.

PACKAGING & LABELLING

• Cannabis-specific requirements (e.g. plain packaging, THC symbol, warning statements, THC/CBD content) also apply

• Food-grade, child-resistant packaging

• Exterior container cannot contain more than one immediate container

• Cannot provide additional information about vitamin/mineral content outside the NFT

• Cannot represent product(s) as suitable for use in addressing specific dietary needs – for example:

o High in protein

o Suitable for low-calorie diet

On the label, you must include - ingredient list, product name, allergens, durable

life/best before date (if <90 days), and a cannabis-specific nutrition facts table.

Cannabis Licensing

TYPES OF CANNABIS LICENCES

• Cultivation – Standard

• Cultivation – Micro

• Cultivation – Nursery

• Processor – Standard

• Processor – Micro

• R&D

• Sale for Medical Purposes

• Analytical Testing

• Cannabis Drug

• Industrial Hemp

The Cannabis Act and Regulations, introduced new facility licencing classes to cultivate, manufacture, research, test and sell cannabis and cannabis products.

PROCESSING LICENCE – STANDARD & MICRO

The Standard Processing Licence allows for the following activities:

• Processing unlimited quantities of cannabis.

• Formulation development, manufacturing, packaging and labelling.

• Sale of Cannabis to licence holders: Cultivation, Processor, R&D, Testing Laboratory, and Cannabis Drug Licence.

• Sale of Cannabis Products to Provinces for recreational distribution and to Federal Medical Sales Licence holders for medical distribution.

The Micro Processing Licence allows for the same activities as Standard with the restriction:

• A holder may process a total of 600 kg of dried cannabis (or equivalent) annually .

Application Requirements -Site

• A Licence is site specific

• Site Survey from a certified surveyor.• 500 m radius Aerial view

• Assessment of the site with respect to the surrounding.

All municipal and provincial regulations must be met

• Site ownership consent required• Notify authorities: Fire, Municipality/District, Police of intentions to

obtain a licence

Application Requirement –Mandatory Roles

• Responsible Person – Operational responsibilities

• Head of Security – Responsible for the Security program at the site

• Quality Assurance Person (required for Processor License only) – Responsible for assuring the quality of the product.

• Alternates (if required)

Application Requirement -Security Clearances

Timeline: 3 months to 3 yearsAverage: 1 year

Directors, Officers and Key shareholders of a corporation, personnel with mandatory roles have to undergo security clearance.

Steps for security clearance:

1) Fingerprinting

2) RCMP does basic check3) RCMP forward report to HC

4)HC does an exhaustive background check

Application Requirement -Quality Assurance Person (QAP)

QAP is a mandatory role for a Processing License.

• Is required to have experience and knowledge in the class of cannabis being manufactured at the site.

• Approve the PCP before implementation.

• Responsible for approval of the final product prior to release.

Health Canada must approve the QAP.

• Report outlining qualifications and experience including proof

• Work schedule and Report on responsibilities.

Application Requirement -Floor Plan

• Where cannabis will be present in the facility

• How cannabis will move through the facility

• What activities will be conducted in each room

• Security features: In and around the facility, and a report discussing those features.

• Traffic flow• Handwash stations and

lavatories

Application Requirement -Organizational Security Plan

(OSP)

• Provide information around HoS (Responsibilities, schedule)

• Summaries of SOPs around physical security

Procedures that will prevent, detect and respond to security incidents

• Who will have access to the CTLS post-licencing

• Details around security awareness and training• Site organizational chart and role descriptions

• Details around additional security measures.

• List of individuals who should have security clearance

• Ongoing need to keep the OSP current.

Application Requirement -GPP

Good Production Practices Report:

A system for ensuring that products are consistently produced and controlled according to quality standard. They minimize the risks involved in production that cannot be eliminated through testing the final product.

Report showing how applicant is meeting Part 5 of the Cannabis Regulations

• SOPs

• PPEs

• Storage

• Distribution

• Building or part of building

• Equipment

• Sanitation

• Air filtration and ventilation

• Complaints

• Pest Control

• Testing; composition and contaminants (chemical and microbial)

Application Requirement -Record Keeping

Record Keeping Report:• Records have to be kept of all

activities once licenced

• Identify to HC if you will be using electronic or manual method for record keeping and retention.

• How Cannabis will be tracked from the point of receiving to sale. (Inventory Reporting through CTLS)

• Demonstrate to HC that applicant understands what the record retention period is for the various records.

Application Requirement -Evidence Package

Evidence Package showing the visual evidence of the site operational readiness is required to be submitted within 10 business days of submitting the application.

• Photographic evidence in PDF formatted files.

• Application number to be referenced.

• Visual evidence in the form of photographs to show compliance to Good Production Practices Requirements of the regulations along with GPP report with specification for material of construction for wall, floor, ceiling, HVAC system, lights, fans, cameras and other security features.

• Still pictures, day and night shots of perimeter and inside building of each room, tour of each room showing security devices and security features of each room, pictures of security devices in the facility. Security features have to be 100% operational.

Next Steps….

After Application Submission

• Application Screening

• Review and Security Clearance.

• Pre-licensing and approval process.

• Issuance of licence.

After Licensing

• PCP Implementation

• Manufacturing 2 batches

• License amendment.

Path to Market -License Amendment to sell

Licence amendment required to sell a class of cannabis product under a Provincial or Territorial Act or to medical patients

1. Must first produce 2 batches of product ready for sale

2. Submit a report and amendment application

License Amendment

Information required to be available:

• Quantity of product that will be available for sale

• Summary of disposition process

• Templates of various records

• Executed records for the 2 batches

• Specifications of packaging

• Pictures of packaging and final product

• Information on how packaging meets requirements

• Product weight configuration

• Barcode placement

• SOPs for label review and approval

• Template label

• Product shipping service

• Storage conditions

• Sampling, Training, PPE, Sanitation SOPs

• Training SOPs

• PCP

License Amendment continued

Information required:

• Final product testing SOPs

• Expanded Certificate of Analysis (CoA)

• Specifications of the products

• Recall SOPs

• Name of testing lab approved by Health Canada.

Inspection for Amendment

Pre-sale Inspection (1 – 4 days)

• Inspect the 2 batches in their packaging and their CofAs

• SOPs and records: things that went into the report

• Video surveillance: related to the 2 batches

• Security compliance: logs, system, personnel training, visitor logs

• Other documents: floor plans, supplier agreement, inventory etc.

• PCP and related records.

Notifications to Health Canada

60 days at least prior to making a new form, or new method of administration available for sale, provide HC with a written notice:

• Class of cannabis e.g. edible cannabis

• Description of product with brand name

• Date available for sale

R&D LICENCE

R&D Licences:

• For those who wish to develop new and cutting-edge products in preparation for the cannabis markets.

• A Research Licence can be added to an existing license or obtained independently.

• A company that has applied for or has been issued a licence by Health Canada (i.e. Cultivation or Processor) may add a Research Licence to authorize R&D on cannabis outside the scope of the original license.

• For existing Licensed processors, R & D License will also be required if palatability testing has to be conducted on the product development samples even though they are eligible to do the research under there LP license.

Market sizing: Executive summary

34

CIB (2022)~$100M

(10%)

Edibles (2022)$1B (14%)

Cannabis products (2022)

$7B

Non-alcoholic beverages (2015)

$6.4B

For comparison:Canadian alcohol market in 2017†

† Source: statscan** Source: BDS Arcview, assumed doubling of CIB share of edibles

$22.1B

Beer$9.2B

Wine$7.0B

Spirits$5.1B

$0.8B other

Cannabis infused beverage market potential

IMPORTANT: Figures are ballpark estimates based on a blend of published industry reports and are highly sensitive to how the regulatory environment evolves

4 edibles operating models in Canadian regulatory environment

35

Marketer Manufacturer Integrated IP Development

Brand, promotion

Manufacturing

Warehousing, Distribution, Release

Partial

Product development Varies

Varies

Note: excludes whether cultivation is integrated with manufacturing (processing licenses allow b2b sales)

Optional

Edibles operating model framework

36

Description

Key Benefits

Limitations, Risks, Responsibility

• Own product development, brand, promotion, and distribution channel

• Contract manufacturer for marketers

• Typically multiple clients

• Develop, make and market • Develop products and technology that are licensed to others or vice versa

• Scale• Leverage of existing capabilities

• Control• Autonomy

• Asset light (depending on approach)

• Cannot sell B2C • As with Marketer • Lower profits possible• Low risk (recall, liability, etc.)

Marketer Manufacturer Integrated IP Development

Notes • Processing and inventory in separate building from existing food manufacturing

• High breadth of skills required • Products of R&D cannot generally be sold (even b2b)

• Few examples of this model in practice

Key reg requirements(partial list)

• Processing license• R&D license if supporting

product development with palatability testing

• Processing license• R&D license for palatability

testing (not required if outsource development)

• R&D license

• Margins with branded product• Fewer physical assets

• Greater control of product

• Responsible for ownership & sale, QA release, recall, quality, etc.

• Brand is a “cannabis brand” if appears on product (probably need new brand)

• Cannabis brand cannot be used to promote non-cannabis brand

• HC unclear about possession requirement (sample or full run?)

• Processing in separate building (all?)

• Manufacturer name must appear on label

• Processing license• R&D license for palatability

testing (not required if outsource development)

• Option to leverage Manufacturer R&D license

GPP Requirements

QAPR&D Licences:

• Backed by rigorous compliance and enforcement measures by HC including unannounced inspections from inspectors to verify compliance.

• Noncompliance leads to range of actions from Health Canada depending on severity of issue.

• Cultivation, Processing and Sale for Medical Purpose License holders require compliance to GPP.

• GPP compliance also required for R&D sites where samples are consumed by humans.

Designed to help ensure that cannabis meets quality standards.

GPP Requirements

QAPR&D Licences:

• Cannabis and anything that will be used as an ingredient must be produced, packed, stored and tested in accordance with Standard Operating procedures.

• SOPs must be available for key operational elements like sanitation, employee hygiene, distribution and storage, production processes, sampling and testing.

• SOPs must be revised as needed and employees performing various functions must be trained in their area of work.

• Any deviation to the SOPs must be investigated and details of the deviations must be recorded.

SOPs

GPP Requirements

QAPR&D Licences:

• Only Pest Control products that are registered can be used on cannabis.

• Sanitizers and non-food chemicals must be identified clearly, must be suitable for the intended use and must not pose risk of contamination to cannabis or cannabis product.

• Must be used in accordance with manufacturer’s instructions.

Pest Control Products, sanitizers, non food chemical agents

GPP Requirements

QAPR&D Licences:

• Cannabis and any ingredients must be stored appropriately.

• Storage areas must be designed to ensure there is no cross contamination.

• Cannabis and ingredients must be stored as per storage conditions on the label.

• Records of temperature and humidity must be maintained.

• Cannabis and anything that will be used as an ingredient must be distributed in a manner that maintains its quality.

• Vehicles used for transportation are equipped with the necessary means to maintain quality.

Storage and Distribution

GPP Requirements

QAPR&D Licences:

• Building or parts of the building used for cannabis must be designed, constructed in a manner that permits it to be kept clean, permits effective cleaning and prevents contamination.

• Floors, walls and ceiling must be smooth, impervious, non porous and resistant to cleaning chemicals. Joints must be sealed.

• Regular maintenance of the building.

• Air filtration for odor control and ventilation for air exchange.

• Water supply is appropriate to intended use. Hoses, taps are equipped with back flow prevention.

• Lighting used is sufficient to the intended use and do not alter the color of the product. Light fixtures are shatterproof.

• Vehicles used for transportation are equipped

Building, Filtration, Water and Lighting

GPP Requirements

QAPR&D Licences:

• Equipment are designed, constructed, maintained and operated in a manner that facilitates effective cleaning,

• Can be easily assembled and disassembled.is accessible for cleaning and not a source of cross contamination.

• Prevents extraneous matter and allergen contamination.

• Written maintenance and calibration program is available.

Equipment and Maintenance

GPP Requirements

QAPR&D Licences:

• Sanitation program for effective cleaning of building, equipment and conveyance equipment is available and implemented.

• Health and Hygiene requirement for personnel is developed and implemented..

• Effective controls are in place to prevent the entry of animals and insects in the facility.

• Hand cleaning and hand sanitizing stations and lavatories are available near the production area and equipped with signs explaining proper hand washing.

Sanitation

GPP Requirements

QAPR&D Licences:

• All complaints are investigated by the QAP and measures taken to avoid recurrence.

• QAP must approve all procedures used in production, packaging labelling, storage and distribution of cannabis or anything that will be used as an ingredient.

• PCP required in case of edible cannabis or cannabis extract and is approved by QAP.

• QAP is responsible for final release of any product for sale.

• QAP must have technical knowledge in the area of the class of cannabis being manufactured at the site.

• Must assign duties based on technical knowledge and background.

Additional Requirement for Processing License.

GPP Requirements

QAPR&D Licences:

• Temperatures, humidity controls are appropriate to the products being manufactured and ingredients being stored.

• Records are available.

• Incompatible activities are separated

• Positive air pressure.

• Potable water to be used when water is likely to be in contact with edible, extract or topical.

• No presence of animals and land and surrounding must be assessed for acceptability.

• Has available means to remove and dispose off waste.

• Employees wear clothing and protective covering appropriate to the activity being conducted to avoid cross contamination.

Additional Requirement for Processing License.

Questions?

Thank you.