FAQs for Investors
- What are the unique challenges to investing in the cannabis industry?
- As an investor, am I subject to the same legal and regulatory requirements as a cannabis business owner?
- What is included in the due diligence report GCA produces? How can it benefit me as an investor in the cannabis industry?
- How does GCA source the information provided in the due diligence report?
- How much does a GCA Report cost to purchase?
FAQs for Cannabis Companies
- Given the lack of broad knowledge about the cannabis industry, have cannabis companies had difficulty interacting with banks, landlords, potential investors, etc.?
- What do you see as the greatest potential risks for cannabis companies today?
- How would a GCA Report benefit me as a business owner?
- How does a GCA Report differ from a compliance audit and other due diligence products?
- This industry is rapidly evolving. What's the best way to stay informed?
New to the Cannabis Industry?
- What do you mean when you refer to the cannabis industry? Isn’t cannabis still illegal at the Federal level?
- What types of companies and businesses comprise the cannabis industry?
- Why is due diligence particularly important in the cannabis industry?
- How has the industry evolved and where do you think it is headed?
There are numerous challenges unique to the industry. A prime example is that cannabis is a Schedule I controlled substance under the United States Controlled Substances Act; in other words, it is entirely illegal on the Federal level. Although the Department of Justice generally does not enforce Federal cannabis laws in "legal" states, the product's Schedule I status still poses many obstacles for companies and their investors in areas such as access to banking, interstate deliveries, and Federal tax deductions. A GCA Report comprehensively covers each relevant topic area so an investor can evaluate whether and how the target company is working around the Federal prohibition.
An equity investor is considered an owner under most states regulations. Depending on the jurisdiction, regulatory authorities may subject even a passive investor to some or all of the same residency, background and reporting requirements as an active owner.
GCA tailors its reports to each sector of the industry. We understand the nuances of the different types of businesses and what is important to each. GCA Reports examine the legal and regulatory issues a company faces at both the state and local levels. We also draw on our 40+ years of collective experience as attorneys at major law firms to identify and perform diligence on other issues that can create obstacles for a cannabis business, beyond just the specific areas that are governmentally regulated. Examples of both regulated and non-regulated topics covered by a GCA Report include advertising, zoning, licensing, cash management, and corporate structure.
GCA uses a proprietary process involving multiple resources to gather the information provided in our due diligence report. This includes site visits to the company, consultation with governmental authorities and our own research using independent data and documentation.
The cost of the GCA Report varies depending on the scope of the target company's operations and the jurisdictions involved. A GCA Report is priced competitively in comparison with typical investor due diligence reports in other industries. Contact us for more information about a GCA Report tailored to your specific needs.
Yes, many cannabis companies have found it difficult to partner with those outside the industry. It can be challenging to convince a bank to open an account for their business, a landlord to sign a lease for a cannabis-related business, or an investor to provide capital. A GCA Report can help business owners present themselves to outside parties in the most professional and efficient way possible. It saves time and money by putting all the due diligence answers those parties need together in one convenient package.
The biggest risks for cannabis companies are the ones they have never even considered. The regulations governing the cannabis industry are nuanced and they are constantly changing. Cannabis companies face a number of regulatory, technical and corporate compliance issues. GCA’s due diligence report covers all of these areas, helping you to understand them and to avoid surprises.
Each GCA Report is designed for the target company's specific sector of the industry, helping you better understand the particular legal and regulatory issues you face as a business owner. Sharing the GCA Report with your investors, potential business partners, banks and financial service providers, commercial landlords, attorneys and other service providers easily and efficiently answers their many challenging questions and requirements.
The GCA team's extensive experience in law, finance and business, combined with our deep familiarity with the cannabis industry, uniquely positions GCA to cover both compliance and cannabis-specific business issues. Compliance audits focus only on narrow regulatory and licensing points, while standard due diligence companies do not have cannabis industry experience. The team brings together expertise from both perspectives to create a report that is focused yet thorough.
It is true that cannabis is still illegal at the Federal level. However, multiple states and Washington, D.C. have legalized marijuana use in some form. In the U.S., 25 states have medical marijuana programs. Recreational (or "adult use") marijuana use has been legalized in Alaska, Colorado, Oregon, Washington and the District of Columbia. Legalization efforts are moving forward rapidly in many other states, and industry observers expect a number of current medical states to allow recreational use in the near future.
When we refer to the cannabis industry we are typically considering any business that "touches the plant" (i.e. handles cannabis in the course of its operations) as well as the ancillary businesses that service the industry. Common examples of businesses that touch the plant include dispensaries, cultivation operations and infused product manufacturers.
Ancillary businesses that provide products and services to the cannabis industry run the gamut. There are businesses that help in the cultivation of marijuana (e.g. solar panels, grow lights, HVAC systems), services to help dispensaries run smoothly (e.g. security, cash management, delivery) and everything in between.
GCA tailors its reports to each sector of the industry. We understand the nuances of the different types of businesses and what is important to each.
The industry is new and controversial. It receives intense scrutiny from the media, politicians and the general public. Cannabis companies that are non-compliant with regulations or have poor business practices can quickly attract unwelcome attention, including from Federal law enforcement authorities. Even more than in most industries, it is critical to know in advance whether a company is conducting quality operations.
The cannabis industry is still in its nascent stage and is expanding at a rapid pace given the large potential profits. Growth is inevitable as more institutional investors participate in the space and banking and financial services become more readily available. As the industry grows and becomes more commoditized, sophisticated, high-level due diligence will become even more important. Our independent, detailed, and comprehensive due diligence report can serve all market players.
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