Here is looking at the issues facing the recreational marijuana sector in Canada.

1. MARIJUANA
LEGALIZATION--
CANADA–
JANUARY 2019
BY: PAUL YOUNG, CPA, CGA
DATE: JANUARY 15, 2019

2. PRESENTATION
• This presentation will discuss both the economic as well as side effects to legalizing marijuana in
Canada.

3. AGENDA
• What is Marijuana
• Side effects – Short-Term
• Long-Term
• UN View
• World-Wide effort on Pot
• Cost of implementing the legalization of Marijuana
• Market for Marijuana
• Medical Marijuana Industry
• Marijuana Pricing
• Key company: Canopy
• Final Thoughts

4. INTRODUCTION
• Canada will enter a new era starting October 17, 2018 as pot marijuana will be legal in Canada.

5. CANADA AND LEGALIZATION POT
Source - https://globalnews.ca/news/4356808/ontario-online-cannabis/ and https://www.washingtonpost.com/news/global-
opinions/wp/2018/07/27/the-u-s-and-canada-are-about-to-enter-a-new-era-of-disunity-thanks-to-pot/?utm_term=.dad5dd6682d0
While we know the exact date marijuana will become legal in Canada — Oct. 17 —
the American timeline remains hazy.
It’s possible to imagine a Democrat-controlled Congress and White House in the
not-too-distant-future repealing pot’s prohibition under the Controlled Substances
Act and officially delegating the matter to the states. It’s equally conceivable,
however, to imagine a prolonged era of Republican rule preserving the status quo.
Perhaps, as evidence of marijuana’s harm accumulates, a bipartisan consensus will
emerge to double down on outlawing the drug in some new and creative way.
All we really know is that come this autumn, the United States and Canada are
poised to enter a new era of disunity in a major realm of criminal law. At a time
when the cause of U.S.-Canada integration is already snared on the rocks of
President Trump’s trade war, Prime Minister Justin Trudeau’s pot initiative can
only slow things further.

6. WHAT IS MARIJUANA
• What it is and how it is grown
• Cannabis belongs to the genus Cannabis in the family Cannabaceae and includes three species, C. sativa, C. indica, and C. ruderalis,
(APG II system). It is typically a dioecious (each individual is either male or female) annual plant (life period: April–September).[1][2][3]
• C. sativa and C. indica generally grow tall (some varieties reach 4 metres, or 13 feet) and their females start the production of flowers
rich in tetrahydrocannabinol(THC) (up to 29% by weight) as the season changes from summer to autumn. C. ruderalis is very short,
produces only trace amounts of THC, but is very rich in cannabidiol (CBD), which may be 40% of the cannabinoids in a plant and is an
antagonist to THC, and it flowers independently of the photoperiod and according to age.[4] However, commercial cross-
bred hybrids containing both ruderalis, indica and/or sativa genes exist (usually called autoflowering).
• Fields and/or controlled environment with lights and plants
• Legal view and usage
• Globally, marijuana (cannabis) is the most commonly used illicit drug. Classified as a Schedule 1 controlled substance,
marijuana is a mood-altering (psychoactive) drug that affects almost every organ in the body.
• Surveys show that 34.9 percent of 12th graders in the United States use marijuana, and that close to 6 percent of 12th
graders report daily use of the drug.
• According to the 2013 National Survey on Drug Use and Health (NSDUH), 19.8 million adults in the U.S. used marijuana in
the month prior to being surveyed, and 81 percent of current illicit drug users had used marijuana. (Canada is about 1/9 size
as such the users in Canada are likely 2.2 million
http://www.medicalnewstoday.com/articles/246392.php

7. SIDE EFFECTS OF MARIJUANA – SHORT-TERM
• Short-term memory problems
• Severe anxiety, including fear that one is being watched or followed (paranoia)
• Very strange behavior, seeing, hearing or smelling things that aren’t there, not being able to tell imagination from reality (psychosis)
• Panic
• Hallucinations
• Loss of sense of personal identity
• Lowered reaction time
• Increased heart rate (risk of heart attack)
• Increased risk of stroke
• Problems with coordination (impairing safe driving or playing sports)
• Sexual problems (for males)
• Up to seven times more likely to contract sexually transmitted infections
than non-users (for females) (22,32 & 33)
http://www.drugfreeworld.org/drugfacts/marijuana/short-
and-long-term-effects.html

8. SIDE EFFECTS OF MARIJUANA – LONG-TERM
• Decline in IQ (up to 8 points if prolonged use started in adolescent age)
• Poor school performance and higher chance of dropping out
• Impaired thinking and ability to learn and perform complex tasks
• Lower life satisfaction
• Addiction (about 9% of adults and 17% of people who started smoking as teens)
• Potential development of opiate abuse
• Relationship problems, intimate partner violence
• Antisocial behavior including stealing money or lying
• Financial difficulties
• Increased welfare dependence
• Greater chances of being unemployed or not getting good jobs.(33)
http://www.drugfreeworld.org/drugfacts/marijuana/short-
and-long-term-effects.html

9. UN VIEW ON MARIJUANA
• Drug treaties are the 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic
Substances and the 1988 Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.
• Countries that adopted the 1961 convention, including Canada, agreed to recognize "addiction to narcotic drugs
constitutes a serious evil for the individual and is fraught with social and economic danger" and be "conscious of
their duty to prevent and combat this evil."
• Canada would join other jurisdictions that have legalized marijuana in ways that violate such treaties,
like Uruguay — the first country to pass legislation in favour of legalizing marijuana for commercial and
recreational purposes in 2013 — and U.S. states Colorado and Washington.
http://www.cbc.ca/news/health/marijuana-legalization-canada-un-drug-conventions-1.3584148

10. ENFORCEMENT ON POT
• The U.S. war on drugs' symbolic genesis was in 1971, under President Richard Nixon, and Canada has been a supportive ally in this failed
endeavour.
• Police Testing - https://nationalpost.com/cannabis/federal-government-approves-first-device-for-testing-drivers-saliva-for-cannabis - The has to
approved and training is required by police to in terms of using the device.
• The war may be coming to an end in the United States, with reforms and rising awareness that it’s not worth the cost to taxpayers. In 2016
alone, 10 states will vote on marijuana liberalization, and the federal government is struggling to push back against state defiance and the
weight of both public opinion and economic evidence.
• Senator Kirsten Gillibrand (D-NY) has introduced bipartisan legislation to allow medical marijuana use nationwide, and there’s
pending legislation to stop civil asset forfeiture by the Drug Enforcement Administration. Even when it comes to heroin, President Barack
Obama this year acknowledged the strain on law enforcement and emphasized funding for treatment and education, as more appropriate
responses.
• The same process is in play in Canada, and Prime Minister Justin Trudeau has publicly backedlegalization for marijuana with strict regulation—
although hard drugs appear to be outside the Overton Window for the time being.
• What has yet to change, however, is the international front. Even if the strategy runs counter to sentiments and reforms at home, Canadian and
U.S. officials continue to crackdown on production and supply chains in neighbouring countries in the Western Hemisphere.
• Trudeau has mentioned that enforcement has not worked. However, if pot is legalized then you will require enforcement of by-laws/laws related to
growing of Pot. There is no mentioned of the funding required to enforced by-laws, especially the collection of excise, HST and other taxes from
suppliers.
https://www.fraserinstitute.org/blogs/canada-helps-fund-drug-
war-abroad-while-eyeing-marijuana-legalization-at-home

11. UN AND MARIJUANA
Source - http://www.bnn.ca/canada-s-cannabis-legalization-plan-needs-to-factor-un-treaties-opposition-
1.797090
Opposition parties and legal experts are urging the Liberal government to be clear on how it plans to handle
the legalization of cannabis while Canada remains party to three UN treaties that control and criminalize drug
access, noting failure to provide clarity soon could cause confusion on the world stage.
Canada needed to give notice on July 1 if it intended to withdraw from the treaties and stick to its plan to
legalize marijuana by this time next year, said Steven Hoffman, a York University professor who specializes
in global health law.
It didn't, and Hoffman said he is concerned about the message this sends.
"The lack of clarity around how the federal government is going to address its international legal obligations
under the UN drug control treaties is concerning given it sends the message to countries around the world ...
that our international law obligations are not at the forefront of our minds," Hoffman said.
"Canada is one of the world's leading countries, a member of the G7, a country that everyone looks up to ...
what we do and the consequences of us violating international law are very different than the consequences
of other countries ... it is a big deal if Canada breaks international law."

12. GOVERNMENT TAXATION / MARIJUANA
Source - https://beta.theglobeandmail.com/globe-investor/investment-ideas/canadian-marijuana-stocks-
rally-on-trudeaus-dollar-a-gram-tax/article36910209/?ref=http://www.theglobeandmail.com&
Canadian marijuana stocks surged Friday after Prime Minister Justin Trudeau's government proposed a
tax of one dollar a gram of legalized recreational marijuana.
The government said Friday the tax shouldn't exceed $1 a gram or 10 per cent of the producer's price,
whichever is higher. Retail sales levies would be applied on top of that.
For example, 1 gram of dried cannabis costing $8 to produce would be taxed at $1, and the total cost of
$9 would be hit with a sales tax of $1.17, bringing the total to $10.17, the government said in a
statement. The example uses tax rates that apply in provinces such as Ontario. Rates vary in other
provinces.
Aurora Cannabis Inc. surged as much as 22 per cent to $4.94 in Toronto, the highest intraday price on
record. Canopy Growth Corp. gained as much as 5.1 per cent, Aphria Inc. rose 5.4 per cent and
MedReleaf Corp. rallied 7.2 per cent.

13. COST OF MARIJUANA
• Marijuana legalization can lead to the following issues
• More programs to support addiction (https://www.youtube.com/watch?v=likKBDWyAB4)
• More programs to help the mentally ill
• Drug-testing for employers. Marijuana is like alcohol as such it does impair your ability to operate heavy machinery
and equipment.
• Police detect devices for drug impaired drivers. How will drug impaired be charged under the criminal code?
• How will laws be reformed? How long will take it to changed the laws?
• How will the government enforce and collect taxes on marijuana growing operations, i.e. excise taxes, HST, income
tax, etc.?
http://www.cbc.ca/news/politics/pot-mclellan-cost-of-
legalization-1.3758981
Taxes on legal marijuana could add up to billions of dollars a year, but before that happens Canadians may have to make peace with spending to legalize
pot. "People — and I think the provinces, the territories and the government of Canada understand this — do not expect big revenues in the early years,"
Anne McLellan, the head of Canada's marijuana legalization and regulation task force, told CBC News.
"In fact, there are going to be up-front costs that governments at all levels are going to have to absorb."
Hint: Any new government program will have sunk costs of front as part of the initial setup. There will be ongoing cost to support the program. It is too
early to say what those costs will be to government. It is safe bet to say it will not be a complete windfall for the government when it comes to revenue

14. MARIJUANA MARKET / SIZE
• A legal market for recreational marijuana could give Canada’s economy a boost of up to $22.6 billion annually, says a
new study from business services firm Deloitte.
• The study estimates that marijuana sales, even initially, would be at least as large as hard liquor sales in Canada, at
around $5 billion annually, but could be as large as $8.7 billion, making them as large as wine sales.
• The total impact for Canada’s economy from a legal weed market — including growing and distribution, pot
paraphernalia, increased tourism and business taxes — would amount to between $12.7 billion to $22.6 billion
annually.
• The actual number will depend on how the government decides to regulate marijuana, and what price standards it
sets, Deloitte says. Those are decisions the federal Liberals plan to announce next spring.
• Canada's pharmaceutical industry has been lobbying to be admitted to the marijuana game when it's legalized.
Shoppers Drug Mart, owned by Loblaw Co., announced earlier this week it has applied to be a medical marijuana
distributor, a move likely preceding an expansion into recreational marijuana
http://www.huffingtonpost.ca/2016/10/27/marijuana-
legalization-market-size-canada_n_12676754.html

15. HOW WILL MEDICAL MARIJUANA INDUSTRY BE
IMPACTED?
• Medical marijuana industry has been growing in Canada. It is about $5B business annually in Canada.
• How will legalizing marijuana impact that industry?
http://www.canadianmanufacturing.com/operations/canadian-medical-marijuana-firm-
keeps-growing-pair-acquisitions-178041/ or
http://business.financialpost.com/news/agriculture/canadian-marijuana-stocks-jump-
as-liberal-wins-signals-legalization-on-the-table

16. MARIJUANA PRICING / STATS CANADA

17. ONTARIO MOVING TO PRIVATE SECTOR MODEL FOR
MARIJUANA DISTRIBUTION
Source - https://business.financialpost.com/cannabis/what-you-need-to-know-about-ontarios-new-cannabis-retail-plan or
https://lfpress.com/news/local-news/ontario-to-sell-pot-online-and-in-private-stores
Recreational cannabis will be sold online in
Ontario when legalized this fall and in private
retail stores across the province early next year,
the government announced Monday, reversing
the previous administration’s plan to distribute
cannabis through publicly owned outlets.
The Progressive Conservatives, who took
power at the end of June, said public safety was
a top concern as they came up with the system,
but critics said the new model could pose
enforcement and regulation challenges.
A government agency called the Ontario
Cannabis Store will sell pot online once it is
legalized on Oct. 17, and a “tightly regulated”
private retail model will be in place by April 1,
2019. The OCS will also be the wholesaler to
private retail stores, the government said.
• Horwath supports POT stores owned
and operated by the govt. Horwath is
backed by OPSEU
• Liberal model was also fraught with
issues in terms of store location -
https://www.thestar.com/opinion/star
-columnists/2018/04/19/weed-stores-
near-schools-everything-is-near-
schools.html
• Private sector could involved drug
stores as part of dispensing marijuana
to consumers
• The key will be how much will be
the dispensing charges.

18. CANOPY CORP
Former CFO for Liberal Party
• He may volunteer in his role as chief financial officer with the Liberal Party of Canada, but Chuck Rifici is in line for a big pay day, thanks to
one of the party's key platforms.
• Rifici, who has been a member of the Liberal national board of directors since 2011, is also the co-founder of Tweed Marijuana Inc.,
Canada's biggest full-scale producer of government-sanctioned pot producer, which is based in Smiths Falls, Ont. Source :
http://www.ottawasun.com/2015/10/28/liberal-cfo-could-rake-in-marijuana-money-with-legalization
Canopy Corp
• Key Quote –” Conservative MPs pressed the government hard Wednesday on a spike in trading in marijuana company stocks two weeks
ago, alleging the Liberals may have leaked an upcoming report into legal weed. On Nov. 16, the TSX halted trading on six different medical
marijuana companies over the course of the day -- some of them several times. The halts were automatically triggered by wild swings in
prices. Source - ”http://www.ctvnews.ca/mobile/politics/conservatives-hammer-liberals-on-marijuana-stock-surge-1.3184506
• Key Quote “Canadians may be very worried about Donald Trump leading the U.S., but there is one silver lining for Canada that arose from
the American election: a possible boost to our nascent marijuana industry. Take, for instance, Canopy Growth Corp., Canada's largest
medical marijuana manufacturer. The company has seen shares rise by a third since the U.S. vote. Its shares jumped 15 per cent on
Monday alone, after the company announced its revenue had more than tripled in a year. As of that afternoon, Canopy Growth was
valued at $1.3 billion, making it the first billion-dollar marijuana company in Canada. ” source -
http://www.huffingtonpost.ca/2016/11/14/canopy-growth-billion-dollar-marijuana-company_n_12967236.html
• Mergers and Acquisitions - http://business.financialpost.com/news/agriculture/canopy-grow-to-acquire-rival-mettrum-for-430-million-
to-form-mega-company-serving-half-canadas-medical-pot-users

19. FINAL THOUGHTS
• Canada legalized pot but the legal, distribution, etc processes have been a failure.
• There needs to be a fully costed model including allocation of moneys to mental health, law enforcement,
licensing, product quality and other areas. The government should not be treating the marijuana as windfall unless
it allocates funds to support all aspect of the program
• The government has to open and transparent with the awarding licensing process from production to
distribution/retail.
• The government will need to work with government around to world to support changing the laws for marijuana
• Foreign Aid will need to be review in terms of law enforcement to countries like Mexico, Colombia, Haiti, etc.
• Age limits will need to be set, i.e. 19