Aquarius Cannabis Inc. wants to become the first national marijuana brand, and last month it took a step toward that goal by filing paperwork to sell its shares publicly.
But the Woodland Hills company, facing challenges stemming from marijuana’s ambiguous legal status, is adopting a business model more similar to the Sunkist citrus cooperative than Big Tobacco.
The rules for growing, processing and retailing pot differ from state to state, and even city to city, and the industry is highly regulated in terms of investment, ownership and taxation. What’s more, marijuana is still a federally controlled substance, though the Justice Department has issued guidelines that allow states to regulate its use locally.
To work within this regulatory patchwork, Aquarius plans to license growers to use a proprietary system for growing the flowers, including indoor temperature and humidity controls. The system also covers storage, curing and packaging the pot. In return, the company will also license the growers to sell the product under the Aquarius brand name at a premium price.
However, unlike Sunkist, Aquarius won’t buy the pot from the growers. The prospectus filed Dec. 17 with the Securities and Exchange Commission states that at no time will Aquarius “produce, distribute or own the actual marijuana products that are distributed under (its) brand names.”
Davis Lawyer, the company’s 27-year-old chief executive, said he recently signed a deal with a grower in Washington, but since state law prohibits profit participation deals for marijuana, he had to charge a straight consulting fee.
“Every state is different, but our goal is to get so we are winning or losing with our clients,” he said. “That will allow us to become a national force.”
Read the full story in the Jan. 12 edition of the San Fernando Valley Business Journal.