SALEM – A Lynn felon arrested following a hand-to-hand drug deal where a packet of cocaine was apparently exchanged for $40 is held at the Middleton Jail on $3,500 cash, after pleading innocent.In Salem Superior Court Friday morning, James Newson, 36, of 16 Parker St., pleaded innocent during his arraignment to a charge of possession with the intent to distribute cocaine, second or subsequent offense.Assistant District Attorney James P. Gubitose asked Judge Howard J. Whitehead to increase the $2,500 initial cash bail set in Lynn District Court to $5,000 based on the strength of the case, the defendant’s record and the mandatory punishment Newson is facing – five years in prison.Gubitose told Whitehead that the charge concerned a hand-to-hand drug deal in Lynn on the afternoon of May 1 in which $40 was exchanged for a packet of cocaine in the area of Union and Lincoln streets.Following the drug deal, Newson left the scene, but was stopped by police on the road.With that information, police were able to find a picture of Newson on the Registry of Motor Vehicles Web site and issued a warrant for his arrest.Defense lawyer Mark Schmidt strongly opposed any increase, pointing out to Whitehead that his client had not even made the $2,500 bail, which he felt was “significant.”Schmidt said his client has lived at the same address in Lynn for two years and has had no difficulties with the law for years.He said he had been working at a Burger King fast-food establishment, citing roots and work ethics in the community, as he suggested a $500 cash bail.Whitehead explained that he felt the case called for a $3,500 cash bail, as he imposed it.Because Newson previously was convicted of drug distribution twice in 1992 out of New Bedford, he faces a minimum mandatory punishment of five years in state prison, with no chance of early release.Newson is due back in court on Oct. 17 for a pretrial conference.