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Vertical integration will ensure that Blüm SL obtains medical cannabis that complies with the State, Attorney General Guidelines, and with local rules and regulations. Further, vertical integration includes checks and balances designed to prevent diversion of cannabis to a non-patient. A representative sample of all cannabis acquired, regardless of source, is sent by Blüm SL to an independent reputable laboratory for analysis. Only cannabis in compliance with laboratory testing, as required by the State in the MMRSA shall be made available to patients. Blüm SL will require that any contracted laboratory conducts testing as required by the MMRSA, pursuant to Licensed Manufacturers and Licensed Laboratories Article 10 section 19342. Thus, testing requires that a Blüm SL contracted laboratory adopt “a standard operating procedure using methods consistent with general requirements for the competence of testing and calibration activities, including sampling, using standard methods established by the International Organization for Standardization, specifically ISO/IEC 17020 and ISO/IEC 17025 to test medical cannabis and medical cannabis products that are approved by an accrediting body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement.” Blüm SL Product Acquisition Blüm SL’s closed-loop model provides for acquisition of medical cannabis flowers, extracts, edibles and clones in bulk from its affiliated Blüm Oakland dispensary. This procedure ensure that acquired resources were cultivated onsite and are safe products with assured quality that meets or exceeds standards required by the City of San Leandro. All cannabis grown at Blüm Oakland is inventoried, tagged, and tracked from seedling to sale, under the control and supervision of Blüm Oakland and/or Blüm SL until delivery to the patient. Blüm SL shall work closely with the City of San Leandro to ensure compliance with all City Regulations. Additionally, Blüm SL will also have access to and acquire medicinal cannabis products from patient vendors who sell bulk product to Blüm Oakland. Among other advantages, a lower price point for patient’s results as bulk product acquisition is made for two dispensaries, and because of seed to sale integration procedures. Further, Blüm Oakland has a proven reputation for offering the highest quality medical cannabis products at the best prices. All bulk product acquired from Blüm Oakland will be securely transported to Blüm SL by a contracted armored car delivery service, to promote safety, and reduce risk of robbery or theft. Further detailed information regarding the transportation process is available upon request. All Blüm Oakland vendors must be qualified patients who fully comply with the City of San Leandro Ordinance and the Attorney General Guidelines, and all applicable State and local regulations. Vendors will be required to be registered members of Blüm SL who adhere to strict security protocols including providing information about their grow location, procedures, testing, and operations to ensure compliance with State and local laws. Vendors will be given a unique number to track the entirety of their product, and to track all collected monies due to the vendor. At year’s end, monies paid to vendors are traceable and reported under the vendor’s tax identification numbers. Inventory Management Blüm SL recognizes that it is essential to maintain accurate records and inventory tracking to ensure proper accounting and full legal compliance. After extensive experimentation and research Blüm SL selected MJ Freeway, a software tracking system that enables precise tracking, traceability, and transparency in inventory protocols, and was developed specifically for the needs of the medical cannabis industry. This system comprises three core modules covering patient management, inventory control, and point of sale. The MJ Freeway system is the most compatible point-of-sale platform with GAAP standard accounting and auditing. Tracking Blüm SL’s inventory systems will track products from arrival, into inventory, and at point of sale (POS), where it is debited from inventory and assigned at delivery to the purchasing patient. Upon receipt of completed laboratory test results verifying the relevant product sample is free of pesticides and/or contaminants, Blüm SL breaks product batches down into smaller retail quantities that are coded into the tracking system. The coding system assigns a unique barcode to each retail package that identifies the product variety, amount, and source. This enables each retail package to be associated with the larger bulk shipment that was received into inventory. The net weight of the individual packages must equal the size of the bulk product delivered to Blüm SL. A flash audit of the system will show arrival of the original batch shipment, packages currently in inventory, as well as product sales, including quantities per sale including the individual purchaser’s unique patient ID numbers. This enables Blüm SL to locate and track all products in the supply chain and to immediately identify the source of any unauthorized inventory 427