Los Angeles Cannabis Licenses: Phase II Eligibility Information

The City of Los Angeles anticipates opening up Phase II of its cannabis licensing process on August 1, 2018. To prepare potential applicants for the application process, the City released a set of guidelines that applicants can use to help establish eligibility for licensure. The document issued by the City is called Guidelines to Establish Eligibility Pursuant to LAMC Section 104.08 v2 and can be accessed via this post or the City’s Department of Cannabis website.

The point of the Guidelines is to show potential applicants the type of documents that can be used to prove to the City they are eligible for licensure during Phase II. While the City’s Cannabis Procedures Ordinance established twelve things that an applicant must do operate pending the review of its license applicantion, the Guidelines released by the City focus solely on the following three requirements:

1. That the applicant was engaged in the same type of Non-Retailer Commercial Cannabis Activity for which it seeks a license, prior to January 1, 2016;
2. That the applicant supplied an existing medical marijuana dispensary (“EMMD”) prior to January 1, 2017; and
3. That the applicant qualifies under the City’s Social Equity Program.

How compliance with the three requirements listed above is proven will differ from applicant to applicant depending on its business history, documentation practices, and application technique. While all application materials will be reviewed on a case-by-case basis for “authenticity, reliability, and relevance”, the City provided potential applicants with a list of documents that may be used to show compliance with the three requirements noted above.

For example, among other things, the following documents can be used as evidence that an applicant was engaged in the same type of Non-Retailer Commercial Cannabis Activity for which it seeks a license, prior to January 1, 2016:

1. Written contracts or agreements executed prior to 2016, including those with clients, suppliers, and employees.
2. Commercial leases executed prior to 2016.
3. Business formation documents executed prior to 2016.
4. Business records reflecting operations prior to 2016, including emails, letters, notes, invoices, receipts, shipping manifests, bank statements, insurance documents, tax returns, accounting documents, payroll documents, permits, and licenses.
5. A declaration signed under penalty of perjury by an Applicant or an Applicant’s employee that specifies: the time period in which the business operated, all types of cannabis goods manufactured or cultivated prior to 2016, an approximate volume of cannabis goods manufactured or cultivated prior to 2016, an approximate amount of revenue generated by the business prior to 2016, and an approximate count of the number of employees the business employed prior to 2016.
6. Any other document an Applicant contends provides evidence that the Applicant was engaged prior to January 1, 2016, in the same type of Non-Retailer Commercial Cannabis Activity for which it now seeks a License

Similarly, per the City’s Guidelines, the following may be provided as evidence that an applicant supplied an EMMD prior to January 1, 2017:

1. Written contracts or agreements with an EMMD executed prior to 2017.
2. Business records reflecting a business relationship with an EMMD prior to 2017, including emails, letters, notes, shipping manifests, invoices, receipts, and payment records.
3. Declarations signed under penalty of perjury by an Applicant, an Applicant’s employee or an owner of an EMMD that describe, in detail, the business relationship between an Applicant and an EMMD prior to 2017. Such declarations must specify: the time period in which the business relationship existed, all types of cannabis goods supplied to an EMMD prior to 2017, an approximate volume of cannabis goods supplied to an EMMD prior to 2017, and an approximate amount of money an EMMD paid to an Applicant for cannabis goods prior to 2017.
4. Any other document an Applicant contends evidences that an Applicant supplied an EMMD prior to January 1, 2017.

When it comes to proving the applicant qualifies under the City’s Social Equity Program, the City’s Cannabis Procedures Ordinance notes many requirements for Social Equity Applicants. That being said, the Guidelines released by the City merely touch upon the types of documents that may be used to show:

1. Evidence that an Applicant has a California cannabis arrest or conviction prior to November 8, 2016.
2. Evidence of low income status.
3. Evidence of residency in a disproportionately impacted area for either five or ten years.
4. Evidence that a Tier 3 applicant will provide a Tier 1 applicant capital, leased space, business, licensing and compliance assistance, and access to property with no rent and prorated utilities for at least three (3) years, and
5. Evidence that a Tier 3 applicant will provide a Tier 2 applicant capital, leased space, licensing, and compliance for at least three years.

For a complete list of documents that may be used as evidence of the items above, a complete review of the City’s Guidelines is suggested.

With the City’s release of the general Guidelines discussed herein, potential applicants can start compiling information and documents to prepare for the quick 30-day Phase II application window. Proper preparation is key to submitting a successful license application in the City of Los Angeles. For assistance with your Phase II license application in Los Angeles, please contact the compliance team at Rogoway Law Group.