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NAVF-Pharma’s Business Model is Unique Given of Tribal Engagement, Thus, NAVF-Pharma, Is Not Subject to the Same Issues, which Are Costing the Cannabis Industry Billions in Losses.
Due to the challenges within the Cannabis industry, NAVF-Pharma’s competitors are less profitable and more price sensitive. (See the previous section “Competitive Revenues v. Prohibition and other Market Deterrents”). Whereas, NAVF-Pharma, due to its unique structure, does not have such limitations. (See: NAVF-Pharma’s Significant Competitive Advantage).
Source: PitchBook Analytics & Morningstar Data Services, 2019
IRS Rule 280e – Tax of 100% of Company Revenue without Dedications – “No deduction or credit shall be allowed for any amount paid or incurred during that taxable year in carrying on any trade or business if such trade or business . . . consists of trafficking in controlled substances . . . which is prohibited by Federal law . . .” Department of the Treasury, 2019.
Source: 26 USC 280E. Expenditures in connection with the illegal sale of drugs
Cannabis Banking and Credit Card Prohibition – “Policy Barriers to Marijuana Banking, as Cannabis is still illegal under the Federal Government, who are charged with banking oversight…” ABA, 2019, however, regulations are slowing changing, allowing banks to provide services to cannabis companies[1].
Source: [1] Secure and Fair Enforcement (SAFE) Banking Act, which would allow banks and financial institutions to work with cannabis businesses. The bill now faces an uncertain future in the Republican-held Senate, with little time left on the legislative calendar and Congress already distracted by funding fights and the House Democratic impeachment inquiry into Trump.
Interstate and Global Export / Import Laws– “with few exceptions, the transport of a Schedule I drug, across state or domestic lines, is a high barrier to cross, and falls within the jurisdictions of multiple federal agencies, without clear guidance on policy…” Department Of Justice, 2019[1].
Source: [1] United States Department of Justice Drug Enforcement Administration Office of Diversion Control, Practitioner’s Manual An Informational Outline of the Controlled Substances Act, 2019
Product Liability Risks – According to JD Supra, proposed regulations require that participants in the cannabis industry have liability insurance. Public policy supports this requirement for several reasons. First, there is a strong public policy in favor of compensating those who suffer compensable injury. Second, private insurance regimes often provide excellent loss prevention services directly – and indirectly by their underwriting practices. Finally, liability insurance provides stability to industry participants. However, US Insurance companies are refusing to continue product liability policies for Cannabis, given its illegal status on the federal level and recent lawsuits on product defects and deaths as a contributing factor. These companies may also charge an absorbent premium and/or cost of insurance, given the automatic judgment due under Negligence Per Se. That means that if a plaintiff asserted a federal law, the Negligence Per Se theory predicated on a violation of federal law. As an example, in California, Negligence Per Se is not a separate cause of action but is the application of an evidentiary presumption. So, any action against a defendant, if admitted in federal court, would automatically create both a presumption of guilt and liability for the defendant or the company that sold and / or manufactured the cannabis product to the consumer[1].
Source: [1] “Beyond manufacturers, anyone identifiable as ‘an integral part of the overall producing and marketing enterprise’ is subject to strict liability.” Arriaga v. CitiCapital Commercial Corp. (2008) 167 Cal.App.4th 1527, 1534.