Regulation and enforcement are tightening in Florida for CBD products ‘grown as hemp’ and being imported into the state. Recent interviews and tips from industry insiders suggest traditional distributors for smoke shops and natural products have had “significant product seizures” in the wake of Florida legalizing medical cannabis last November—a  clear marker that Florida is pushing for CBD products grown and regulated as marijuana, not CBD products grown and regulated as hemp.

With enforcement tightening on CBD products grown as hemp in Florida, the CBD products grown as marijuana will gain market share. Case in point. Surterra.

According to Alan Brochstein, Surterra Holdings filed a Form D with the SEC on December 9th indicating it had raised $10.3mm from the sale of equity to 3 investors, with the first sale having taken place November 8th. According to the Atlanta Business Chronicle, which checked with CFO Jim Whitcomb, Surterra has raised $15mm.

Surterra holds one of the six licenses in Florida’s low-THC medical cannabis program and is headed by CEO Jake Bergmann, who also leads hedge fund Valkyrie Capital, which he founded in 2012. Other officers and directors mentioned in the filing include Wesley Van Dyk, also an employee of Valkyrie Capital, James Whitcomb, Jason Becker, Tom Venables, John Rasmussen and Cameron Champion.

But if you are ready to be confused then you should know Surterra isn’t listing any “Low-THC cannabis” products on their website. They are listing “medical cannabis” products. Say what?

First, some definitions on what’s going on in Florida…

What is “low-THC cannabis” as defined in Florida?

In Florida, low-THC cannabis is distinct from medical cannabis in that it contains very low amounts of the psychoactive component tetrahydrocannabinol (THC). Because of its low levels of THC, low-THC products do not have the euphoric properties of full-potency cannabis and typically do not result in patients experiencing the “high” commonly associated with cannabis. In order to qualify as low-THC, the flowers, seeds, resin, and any other product derived from the cannabis plant must contain 0.8 percent or less of THC and more than 10 percent of cannabidiol (CBD) weight for weight.

What is “medical cannabis” as defined in Florida

In Florida, medical cannabis is distinct from low-THC cannabis in that it can contain significant amounts of tetrahydrocannabinol (THC). This is the chemical compound that causes the “high” commonly associated with cannabis. The term medical cannabis includes all parts of a cannabis plant, its seeds, resin extracted from any part of the plant; and every compound, manufacture, sale, derivative, mixture, or preparation of the plant or its seeds or resin.

Surterra’s Product Line: Understanding the CBD Market

Through our first ever CBD market research and analysis in the The CBD Report, HBJ categorized CBD products “grown as hemp” and “grown as marijuana” with help from our data partners at BDS Analytics. CBD products fall under different licenses and regulations depending on their state of cultivation and thus must be understood and explained differently depending on their cultivation, regulation and point of sale.

Products “grown and sold has marijuana” must be grown under a marijuana state program (cultivation and license) and sold in a dispensary (point of sale). CBD products “grown and sold as hemp” must be under .3 percent THC, imported, or grown domestically underCBD products “grown a Section 7606 of the Farm Bill). CBD products sold as hemp are sold across every other industry channel besides dispensaries (e.g. Natural Products, Smoke Shops, Practitioners, etc.).

Concerning CBD products grown as marijuana, we then index the point of sale of these dispensary products into four categories:

  • No THC – These are products with no significant THC levels (less than 0.3 percent dry weight or no labeled THC in brand-ed products) such that they technically meet the requirements to be defined as hemp (though products may have been grown under marijuana licenses). These are typically branded products that contain no THC, are under 0.3 percent THC and may be labeled as hemp extract or containing phytocannabinoids.
  • High CBD – A product with a high percentage of CBD relative to THC. These products are purchased because of CBD benefits but they don’t count as hemp because the THC level is significantly over 0.3 percent. Products in this category have a CBD:THC ratio of at least 4:1.
  • Variable – CBD products containing THC at a CBD:THC ratio that doesn’t fall between the 4:1 and 1:2 ratios used for the other categories.
  • High THC – A product with a high percentage of THC in relation to CBD. CBD flowers and branded products where the CBD:THC ratio is less than 1:2 are included in this category

And then we analyze these ratios across point of sale for a product line that a company is selling to better understand what is really going on with CBD products sales.

If we use Surterra’s products as an example, they would be categorized as follows based on their CBD:THC ratios.

    • Calm Oral Spray (12.5 : 1) High CBD
    • Calm Tincture Oil  (12.5 : 1) High CBD
    • Clam Topical Lotion (12.5 : 1) High CBD
    • Calm Vaporizer Cartridge (12.5 : 1) High CBD
    • Serene Oral Spray (5 : 1) High CBD
    • Serene Tincture Oil (5 : 1) High CBD
    • Serene Vaporizer Cartridge (5 : 1) High CBD
    • Soothe Oral Spray (1 : 1) Variable
    • Soothe Tincture Oil (1 : 1) Variable
    • Soothe Vaporizer Cartridge (1 : 1) Variable
    • Relief Vaporizer Cartridge (1 : 9) High THC
    • Relief Oral Spray (1 : 9) High THC
    • Relief Tincture Oil (1 : 9) High THC

Florida’s “Low THC” definition is out of touch with the market and Florida should use the global standard of .3 percent as regulated in the hemp industry to help the market mature and better understand CBD grown and sold as hemp relative to CBD products grown and sold as marijuana.

Regardless, it’s clear Surterra is not offering a “Low THC” CBD product  – though it has a license to do so – as its lowest CBD:THC product is 8 percent THC.

As such, all of Surterra’s products listed on their website would be considered “Medical Cannabis” by Florida’s definition. This is the new market emerging in Florida.

Surterra currently operates a single dispensary in Tampa and cultivates and processes in Tallahassee. Thus, HBJ categorizes Surterra’s CBD sales as “CBD Grown as Marijuana.” But in Florida all of their products would be considered Medical Cannabis, not Low THC Cannabis. Confused yet? Don’t worry. We have you covered with more company examples and data.

We will continue covering Surterra and bringing you the latest news and market developments with both hemp and marijuana CBD companies in the United States. To learn more about CBD companies likes Surterra and to make sense of all this market mayhem and excitement, grab a copy of The CBD Report.

Image Credit: Copyright Joe Rondone/Democrat