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Video StaffVideo StaffMay 24, 2019

2min2700

Organigram is the latest Canadian company to begin trading on the NASDAQ. Using the symbol, OGI the cannabis company said that investor demand pushed them to make the move.

Green Thumb Industries closed on a $105 million secured debt financing.

Gotham Green advanced an additional $80 million to MedMen as part of the previously announced convertible credit facility

It was a super busy week for acquisitions.

Canopy Growth finalized its acquisition of skin care company This Works in an all-cash deal valued at C$73 million.

MPX bought all the share of Swiss CBD company HolyWorld in a deal valued at C$13 million.

Australis Capital is acquiring Green Therapeutics in a deal valued at $8 million.

Northern Swan took a page from the Acreage playbook and named Former Majority Leader Tom Daschle and former Representative Joe Crowley to its board. Crowley lost his seat to Alexandria Ocasio-Cortez.

Horizons ETFs Management launched the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and the BetaPro Marijuana Companies Inverse ETF (“HMJI”). The Units of the ETFs will begin trading on May 24, 2019, on the Toronto Stock Exchange.

TerrAscend generated revenue of $14.6 million in the fourth quarter of 2018 and the net loss for the quarter was $11 million.

It’s a three-day weekend. Markets will be closed for trading on Monday in honor of Memorial Day.

 


Video StaffVideo StaffMay 17, 2019

4min3110

It’s been a busy week for acquisitions and earnings as the industry continues to consolidate.

On Thursday, SOL Global said it was acquiring Northern Emeralds for $120 million. The purchase price will be satisfied by the issuance of common shares in CannCure Investments Inc. and the deal is expected to close on or before August 1. Northern Emeralds is located in Humboldt County, California and is a cannabis cultivation, processing, and distribution company that has six licensed dispensary companies in the state that will operate under the nationally recognized “One Plant” brand. SOL Global said it intends to open One Plant-branded dispensaries throughout California (a total of 20 operating and licensed dispensary companies), Florida, and Michigan.

SOL Global plans on expanding on the Northern Emeralds One Plant dispensaries in California, Florida, and Michigan.

Supreme Cannabis is buying Blissco in a deal valued at C$48 million. Supreme also reported third-quarter 2019 net revenue of $10 million this week.

SLANG Worldwide is acquiring  LBA Global Corporation and its Lunchbox Alchemy brand portfolio and subsidiary Hydra Distribution. The proposed transaction will bolster SLANG’s position in the Pacific Northwest

Trulieve is buying the Connecticut dispensary The Healing Corner but did not disclose the size of the deal.

Aurora Cannabis Inc. reported third-quarter net revenue of $65.14 million, up from $54.17 million in the previous quarter. The company delivered a loss of $158.35 million.

Tilray Inc. reported that its net loss for the quarter was $30.3 million. Even though the revenue increased by 195.1% to $23.0 million, versus last year’s $7.8 million – it was less than the net loss.

CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) reported that its quarterly revenue rose 115% to $16.9 million versus last year’s $7.8 million

Acreage Holdings Inc. (ACRG.U)  is following in MedMen’s footsteps. The company set up a REIT and is selling its properties to the REIT and then it will lease those properties for its operations. The move is expected to unlock the value of the real estate assets.

1933 Industries Inc. said its subsidiary, Alternative Medicine Association, has completed a sale and leaseback for its cannabis cultivation facility in Las Vegas, Nevada for $10.45 million

Cannara Biotech announced today that it has commenced trading on the OTCQB Venture Market under the symbol “CNBTF”.


Video StaffVideo StaffMay 15, 2019

75min2720

This panel was recorded on May 7 at the Green Market Summit in Chicago.

Kris Krane, 4Front Ventures:                         So this panels about the economics of cannabis in Illinois. I’m sure a lot of people are very interested in the bill that was just introduced. So we’re going to get to that later because I want you guys to stick around for the whole panel. We’ve got a medical marijuana program here, it’s still a pilot program, technically. Been fairly slow to develop compared to some other states. Can the panelists talk a little bit about what this program has looked like to date?

Ally Marotti, Chicago Tribune:                       So just to kind of give a snapshot of the numbers, we’re at about 62,000 patients right now. That has gone up, even in the past two or three months since February when the state rolled out their new opioid pilot program. Which allows anyone that is prescribing opioid to access medical cannabis.

The other big things that they did back in February, were that they eliminated the background check, and fingerprint requirements for patients, which made things a lot easier and quicker for patients to get their medical cards. They’ve also started granting provisional cards, which if you apply, you can get your card immediately and download it sort of like you would a plane ticket on your phone, and get into a dispensary that way. Instead of waiting, what was taking up to three months for the state to process your application.

So all over the state the numbers are up as far as foot traffic into the dispensaries, and I think we’ll see that. The main numbers haven’t been released yet, they usually release them at the beginning of the month. So I think we’ll see that going up kind of exponentially.

Larry Mishkin, Hoban Law:                    You know, the market in Illinois, for the medical side, has made great strides. It started out, I think, with a very rough roll out, and some uncertainty as we were changing governors right at that particular point in time. I don’t think it’s any shock or secret to say that our prior governor was no fan of this industry, probably … not probably, did a very good job of standing in the way of really giving the program a chance to grow, I think in the way that most people anticipated that it would grow. The hope is now that Governor Pritzker’s in charge, that he’s going to kind of take the shackles off of that a little bit, and really let the medical program go where it needs to go.

But we should all bear in mind that under the current law, the program has just about a year left, July of 2020, if the Illinois state legislature doesn’t expand the medical program, or make it permanent. That shouldn’t be lost in all the shuffle and excitement about adult use.

David Friedman, Young America Capital:               I think one of the positive things that’s come out of being, in what I think we would all agree was the most restrictive marketplace in the United States when the program first rolled out. I think the initial conditions were like nine-

Kris Krane:                          Jersey may have been a little more restrictive.

David Friedman:               Maybe. But if you look at the landscape of the companies that have come out of Illinois, there’s arguably four or five of the top ten MSO’s that have come out of Illinois. You’ve got the GTI’s, you’ve got the Cresco’s. I think by being in a highly regulated, restrictive environment, it forced some really significant capital to come into the space, and best practices to come out of the space. Illinois has actually become a leader in the international marketplace as a result of that early kind of restraints that were put on us.

Kris Krane:                          You know what’s fascinating me? You have really probably four or five of the, I would say, top 12 MSO’s in the country that are headquartered here in Chicago, that came out of this market, which is interesting given that it’s by and large been a pretty crappy market. Right? It’s on the face of it where you would think investors would be pouring lots of money right into the Illinois market when you’ve got a pilot program, you’ve got a really restrictive list of qualifying conditions. Everybody knew from day one this was not going to be the best sort of commercial market, and yet you do have some of these largest players in the country that came out of here.

David, you mentioned some of those reasons. I’d be curious to hear a little more from the panel why has Illinois, and Chicago in particular become such a hotbed for national companies given the relative weaknesses of the program?

Bill Marcus:                        I’ll comment on that. I can’t underscore. I cannot underscore David’s point enough that we happen to be one of the most restrictive, most difficult states to open up in. The capital, I was involved in looking at these companies as they rolled out, the intensive capital investment for a single facility license is upwards of $10 million to $15 million as a minimum, per license. And you have 15 operators here in Illinois-

Kris Krane:                          On the grow side.

Bill Marcus:                        Right, on the grow side. And on that grow side, I believe in the first year you had 7,000 to 10,000 patients.

David Friedman:               The first two years.

Bill Marcus:                        Yeah, you can’t imagine the kind of financial stress these companies went under. I know this because they had to go after round, after round. So to your point, I think it came out of the fact that we were lucky, and blessed that we had very strong capital markets and hedge funds centered in Chicago, that understood this, and were well schooled in terms of going the distance in these investments. They approached it not as a gamble, and not as a lark, it was very well thought out of, and very well supported from an investor base.

Larry Mishkin:                    I would agree with that, and I think that a lot of these guys from day one knew what they were going to do, or had very good ideas. The fact that Illinois was so restrictive, gave them great incentive to look outside of the state of Illinois, and to look at other states. But they’re all highly, highly qualified people who are all successful in other businesses. In that respect, it’s not really surprising at all.

Ally Marotti:                       Yeah, that’s a really good point. I think a lot of people … in other states out west, for example, the industry was built on the backs of folks that maybe were growing illegally, had been dabbling in it in some other way. But here it wasn’t like that. You had lawyers leaving their jobs. You had real estate executives leaving their jobs.

I think part of that is because it was so restrictive, the law was so complicated, you needed a lawyer to be behind a company, to get it up and running, and understand what all the restrictions were. But I think it’s been really interesting for me covering this industry. Up until really last summer, I think the biggest narrative was how all of these companies here were getting creative to find capital. Were they going to go public in Canada? Were they going to somehow convince an investor to invest in them? Were they going to move to another state and operate, which obviously is a big challenge to overcome in and of itself, but it does open up more capital in that way.

Again, as recent as last summer, there were a lot of companies here that had not recouped their investments from 2014-

Kris Krane:                          And still haven’t.

Ally Marotti:                       Still, yeah, exactly, exactly.

Kris Krane:                          We’re talking about increased patient numbers, we’re at 60,000 patients or so now. In a state of 13 million people, that’s not a lot.

Ally Marotti:                       Usually it’s 2% to 3%.

Kris Krane:                          That’s right.

Ally Marotti:                       And here, besides the opioid provision that I mentioned earlier, it’s still at about 40 conditions. Chronic pain is not one of them, that’s the biggest qualifying condition in most states.

Kris Krane:                          Let’s talk about that. As we’re talking about the development of the program to date, this has been not only discussed, but actually litigated, this issue of adding chronic pain and some others. Talk a little bit about what’s happened to date, or the efforts to date to get more qualifying conditions added, and where does that currently stand?

Larry Mishkin:                    Well, sure. We did not have a lot of success following the rules. The rules required submitting petitions to the governor’s board made up of 12 people who would meet every six months, and they would decide. Twice the governor’s board came back to the Department of Health with 12 conditions that they had all approved unanimously, and both times they were told, “No thank you,” and they were turned away.

Kris Krane:                          So the governor rejected his own panel’s recommendations?

Larry Mishkin:                    The governor rejected his own-

Kris Krane:                          He’s allowed to do that?

Larry Mishkin:                    He was allowed to do that under the law, yes.

Kris Krane:                          So what happens from there?

Larry Mishkin:                    Well, so what happens from there is we wind up with people filing lawsuits. Actually it’s been fascinating though, the lawsuit that filed for retractable pain, the theory was one of equal protection. That the state cannot, on the one hand, declare that cannabis is a medicine, but then on the other hand determine that it can be a medicine for some conditions, but not for other conditions. In what seemed like a very random way that they did it, and the state lost in the trial court. And the trial judge ordered the state to start admitting patients into the program with chronic pain.

Immediately Governor Rauner’s administration took the matter up on appeal, and as a result, the status quo was maintained, pending the ruling on the appeal. But it’s still on appeal. Governor Pritzker could direct Kwame Raoul, the State Attorney General, tomorrow to go in and withdraw the state’s objection. That would in effect immediately add chronic pain to the list of conditions that would allow you in.

Bill Marcus:                        Just to be clear, it’s not chronic pain, is it? It’s post-surgical intractable pain.

Larry Mishkin:                    Intractable pain, yeah.

Bill Marcus:                        It’s slightly different-

Larry Mishkin:                    Yes.

Bill Marcus:                        … it’s still wide open, but not quite as wide open as chronic pain.

Larry Mishkin:                    You’re right.

Kris Krane:                          And that hasn’t happened. The Governor’s not taken that step yet, and there’s a lot of people questioning why. The Governor campaigned on expanding the medical program, and on legalizing. The easiest thing that the Governor could do to expand the medical program is say, “Drop this appeal,” and all of a sudden you’ve gotten intractable pain, and a number of other conditions that will qualify. Why do folks think that hasn’t happened yet?

Larry Mishkin:                    I think that takes away some of his political power, to be able to push through the adult use. If all of a sudden you’re able to open the market widely to chronic pain, or intractable pain, then there’s less of an argument, and you could split the … even the majority or the super majority of democrats even more. They can say, “Well, we can kick adult use down the road.” So Pritzker’s a business man, right? If I’m him, I’m going to push through that legislation, and then I’ll circle back, and remove the blocks to the medical conditions.

Kris Krane:                          Do you think he’s waiting to see if the bill doesn’t pass?

Larry Mishkin:                    Maybe.

Ally Marotti:                       Yeah, I think we should also say too that there is a bill that’s been introduced that would make the medical program permanent. Because right now, I think you said that-

Kris Krane:                          Morgan’s bill.

Ally Marotti:                       Yeah, it’s still a pilot program in Illinois.

Kris Krane:                          Yeah, it expires next summer. We’ve got about 16 months or so left, I believe, until the program is technically expired, maybe less.

Larry Mishkin:                    Next year.

Kris Krane:                          Yeah, so less. Let’s stay on this issue, the qualifying conditions, because that really is what drives the market. We look at a state like a state like Arizona’s got about, I think, just over 5 million people, maybe 6 million people. There’s, I think, over 200,000 patients there now. And we’re still at 60,000 in a state of 13 million people here in Illinois. So it’s a pretty poor patient count, compared to what you see in a lot of more mature medical markets.

Ally, you mentioned the opiate bill, and that bill was meant to expand the patient population. I think we’ve seen that it has had an effect. It hasn’t quite had the effect, it seems, that folks may have expected though. So what have we seen out of the opiate bill?

Ally Marotti:                       So I think from what I’m hearing from operators, the biggest influx of patients right … in early February, right after they passed that bill, was from the folks that were granted provisional access. Like I talked about earlier, they could get in quick, they didn’t have to wait for the application to be processed.

We’ve been seeing the opioid has been making a difference. They’re reporting numbers on that separately from the medical cannabis program, because it’s seen as two different things. In April, there were about 1,000 patients enrolled in that. So pretty low numbers, I think for now. All the operators are expecting that to really pick up. In other states, I had mentioned, with chronic pain, which is different than allowing opioid patients. But you do get some of that population, 2% to 3% of the population. So, I don’t know what that is here. We have room to grow for a couple hundred thousand more patients.

Bill Marcus:                        Yeah, easily.

Ally Marotti:                       It’s what folks are expecting.

Kris Krane:                          Yeah, easily.

Ally Marotti:                       And growers and operators are ready for that, but they’re preparing for that. We can get into this later too, once we talk about the new legislation that was introduced over the weekend. But operators here are ready … they’re getting ready for recreational too. But they say that they can also handle a steady increase in patient count, because as the program grows, and if recreational comes on line, like it’s expected to. The medical program will also grow as well. Just because more people are aware of it. There are still people in Illinois that don’t even know we have a medical program. So education’s a big part of what’s keeping that growth at bay right now. So we’ll see.

Bill Marcus:                        But the opioid thing, and I’ll kick it back to you Kris, because you pointed something out earlier, it’s still disproportionately beneficial to the people who are less disproportionately affected by what’s going on. There are not opioid patients in the south side of Chicago, because they don’t have insurance.

Kris Krane:                          That’s right. So my company 4Front, we own and operate Mission, which is the only dispensary right now in the south side of Chicago, down in South Shore. It’s a pretty economically depressed area by and large, and we’ve seen very little impact from the opiate bill. We have seen an increase in patients, we continue to see a steady increase. But we were seeing a steady increase before the opiate bill. It has gone up a bit since then, but from what we’re hearing, from talking with other operators, from the statistics that are being released, this bill has really impacted the dispensaries in the suburbs, and in the high income areas. Where you tend to have more people with opiate prescriptions. You tend to have more people with health insurance. It hasn’t really impacted the businesses nearly as much in lower income areas where you don’t have as many people with those prescriptions. Where people are more likely already getting their opiates from the illicit market, so they don’t have the prescription. You just have not seen that increase in the number of patients in the lower income dispensaries.

So, all right, well let’s start moving to what’s coming here, the legalization bill has been introduced. There’s a lot of exuberance around it, and a lot of media in the last few days around this thing, and whether it’s going to pass. So, Ally, you’ve been covering this for a while. Do you want to sort of kick us off here, and give us some of the high level highlights of what’s currently in the bill?

Ally Marotti:                       Yeah, for sure. So, from a consumer standpoint, the bill would allow each person to possess 30 grams of cannabis, and that’s per household. And also you can grow five plants in a locked room, that’s not accessible to public-

Larry Mishkin:                    Not visible from the outside.

Ally Marotti:                       From the outside, yes. From the business-

Kris Krane:                          They’re literally legalizing closet growers?

Ally Marotti:                       Yeah, basically. I think it will be interesting to see if more clarity comes out around that. Because I feel like there’s some natural light that might be needed in there.

Kris Krane:                          Yeah, it would be nice if you could grow some in your backyard.

David Friedman:               We sell some great grow lights.

Ally Marotti:                       I think about my little plants at home, they would not do well in a closet. Not cannabis plants, regular plants.

Kris Krane:                          Wink, wink.

Ally Marotti:                       Right, but so on the business side, there’s a huge social equity aspect of it. Right now the diversity numbers, as far as operators go in the industry, are not great. Part of that is because there was such a high barrier to entry. Such high application fees, licensing fees, that type of thing, with the medical program. So there’s a huge portion that addresses that. They’re looking at bringing in some money from the medical program, and then the recreational program, to back loans and financially subsidize some of these folks that want to get into the industry.

They’re looking at letting the medical operators, now the growers become growers, and keep those licenses just at those numbers for the first year. The bill is over 500 pages long, so there’s a lot more to it than that, but hopefully that’s a good overview.

Kris Krane:                          Yeah, that’s great. Anything anyone else wants to add? Any provisions that we didn’t hit on yet?

David Friedman:               I think the 800,000 previous convictions is a big deal, very big deal. I think you were talking about that in terms of Larry, what that means for the economy, the local economy’s. Especially in the areas where you are in the south side, where it’s economically depressed. These people can’t get jobs. This is a real stigma for a lot of people. That’s a huge portion of population, 800,000.

Kris Krane:                          800,000 is a lot of people. It’s a state of 13 million people that’s one in-

David Friedman:               Right, it’s 78% of the population.

Kris Krane:                          … it’s a big percent of that. I know when you’re saying 800,000 people, we’re talking about record expungement here, right? So can we talk through the mechanics of what that would look like, what expungement itself would look like? Is it something where folks are going to have to apply to the state to get their records expunged? Or is the onus on the state to go and find anybody with a cannabis conviction?

David Friedman:               Actually, the way it’s written is the police departments are going to be responsible for identifying people in their communities, and then they’ll run the program to get the expungement’s through … I’m sure they’ll come up with a committee, or whatever it is. That should be pretty interesting.

Kris Krane:                          I imagine that’s not going to be popular amongst a lot of law enforcement agencies.

David Friedman:               I can’t see it being very popular.

Larry Mishkin:                    Well, I don’t think it’s going to popular among a lot of the people in the communities either. They have to go back to the people that put them in the system in the first place, to get out of the system. I think there’s a lot of details they’re going to still have to be worked out about this-

Kris Krane:                          No doubt. As an old school activist, and advocate on this, in my mind the onus should absolutely me on the state. If you have a conviction, and the state put you through the ringer on that, the onus should be on them to find the-

Larry Mishkin:                    They have all the records too.

Kris Krane:                          Yeah, exactly. They have the records. It should not be on the individual to have to go and seek out the state, and get the records expunged.

Bill Marcus:                        I think it’s unclear. I think it’s the police departments are responsible for identifying the people in their community. I don’t believe that the people in the community have to go to the police stations to get it. It’s still a little unclear, well it may not be unclear, I haven’t read all 500 pages though.

Kris Krane:                          In most states, the way they’ve dealt with this is that the onus is on the individual with the record. To then apply to the state to have the record expunged, which most people are not going to do. Because they don’t know how, they don’t know the laws in place, there’s a fee generally associated with doing that. And like you said, not a lot of people are going to want to walk into the police station that put them in jail in the first place and say, “Hey, get rid of my record.” Particularly in communities that have been disproportionately targeted by law enforcement for marijuana crimes. Well, will no longer be crimes, right?

Bill Marcus:                        A lot of drug offenses. I think there’s two really interesting things about the social equity program though. One is expunging 800,000 felony convictions extends way beyond the cannabis industry. These are people who can’t get jobs because they have a felony conviction. Not people who can’t get jobs in the cannabis industry.

Kris Krane:                          Right, they can’t get jobs, that’s right.

Bill Marcus:                        The reach of that is significant, way beyond cannabis. The second thing is if you look at what’s going on in the legislature right now, and the people that are speaking out against the bill, Madigan primarily. The biggest pushback is coming from the leniency around the record expungement, and the social equity program.

So there’s going to be some infighting in between the moderate democrats and the liberals that control two thirds majority of both houses around this social equity component. It’s going to be really interesting to see how that plays out. It’s not going to be a very popular piece of legislation to be on the wrong side of.

Kris Krane:                          Like we were talking about earlier, this is basically what sunk legalization in New Jersey so far. The parallels between Illinois and New Jersey are pretty stark. You had both states where you had a democratic either super majority, or a very strong majority in both houses. A republican governor who had done everything he could to try and stifle the medical program. Ended up either losing to, or in Jersey’s case, either retired and then democrat in both states ran on legalization as a top priority. Pushed a bill in their first year. Lot’s of exuberance that it was going to get passed. Well, we’re year two in Jersey now, and that bill still hasn’t passed. My understanding is a big piece of that was this issue around expungement.

From what we hear, behind the scenes, there likely were enough votes to get it passed there in the house, but they were a couple of votes short in the senate. That was over this issue of expungement, and where the threshold should be. In New Jersey, it was any marijuana crimes that included offenses up to 500 pounds.

Bill Marcus:                        Five pounds.

Kris Krane:                          Five pounds, sorry. 500 pounds would be a lot.

Bill Marcus:                        Pretty much [crosstalk 00:19:38].

Kris Krane:                          But for the number of more moderate democrats there who said, “That’s too much, I can’t get on board with this bill,” when they started doing some of the jockeying behind the scenes saying, “All right, how about if we lower it?” You started losing members of the black caucus, and Latino caucus that were saying, “No, this impacts members of our community, and we’re not going to lower this because we’re still going to have a lot of members of our community that are walking around with felony convictions.”

When you have an issue like this where you’ve got virtually no support from the republican side of the aisle. There are a few … there were a few in Jersey, there’s going to be a few here. But by and large, this is a battle that’s playing out within the democratic party. You don’t have a whole lot of wiggle room if you have virtually nobody from the other side. You’ve got moderate democrats that are going to want it to be a more … a little bit more of a restrictive program. Then you’ve got progressive democrats that are going to want to see it much more free, and open. You’ve got, in both states again, very strong, very large Latino caucuses, black caucuses that want to make sure that the interest of their communities are being represented. In some cases that conflicts with what the moderate democrats are going to want to see.

So I want to come back to the social equity question here in a minute, but I think this is probably a good time to sort of ask for predictions. Like what are folks thoughts here on how likely this thing is actually to get passed this session?

I want everyone on the record here.

David Friedman:               I think given the amount of time we have, and we do have a good amount of time-

Larry Mishkin:                    This session’s over in a month, isn’t it? We only have a month for this session.

Kris Krane:                          Less.

David Friedman:               For this month.

Kris Krane:                          Pritzker’s saying it’s going to be passed succession, and it will start in January first. Is that going to happen?

David Friedman:               I think that it’s going to happen. I think that … my reasoning for it also has to do with the fact that social inequity is a big, big deal. Pritzker really behind the scenes, I’m told, has worked very hard on this.

Kris Krane:                          No doubt about that.

David Friedman:               Rep Kelly, and others. Also the fact that the main constituents in Illinois have worked hard from a corporate standpoint, in terms of lobbying as well. I think it will pass. I want to … I’ll let the rest of the panel talk, and then I want to bring up one more point.

Kris Krane:                          All right, we got one yes.

Ally Marotti:                       Okay, so I’m going to remain objective as a journalist, and not say one way or the other if I think it’s going to pass or fail. But I will tell you what I know, and I know that the sponsor’s of this bill have been working on this for a long time. This wasn’t something they started putting together as soon as Pritzker got elected. They’ve been working in the space, on the medical side for years.

The social equity part of it, that seems to be drawing some ire from some folks now. Nitpicking what’s wrong with it, what can we do better? The sponsor’s again, worked with folks, minority groups, the Illinois black caucus. A lot of different folks came to the table to put this bill together. I’d imagine that’s why it’s over 500 pages long. So I think that’s also part of why they waited so long to introduce it in this session. We only have a few more weeks to get it passed. I think it’s partially because they hadn’t reached a decision on stuff. I was reporting out a diversity story a few weeks ago, and at that point they hadn’t nailed down the social equity part of it.

So I think this is something that they had a lot of people weigh in on, and they thought, “How are we going to get this passed? How do we need to write this language to get it passed before they put it in there?”

Kris Krane:                          So take that as a yes?

Ally Marotti:                       We’ll see, we’ll see.

Larry Mishkin:                    I would like to be optimistic, but I recall all of the problems that surrounded the roll out of the medical program. It took longer to pass the legislation than they thought. It took forever to get the administrative regulations issued. Long before we’ll ever have an adult use sale, all of these things are going to have to be worked out.

I think it’s very, very optimistic of them to believe that they can get it passed this session. We don’t have any final word on what Michael Madigan has said. We all know that nothing’s going to happen in this state, unless Michael Madigan supports it. I think part of what’s going on is he’s trying to get a feeling of the pulse of that part of the state that lives south of I-80. Whether the people down there are really going to put their support behind this.

I can’t speak to that one way or the other, because I don’t know the answer. But, there are a lot of issues out there that do have to be addressed. I’m not saying it can’t be done, but I see it as being somewhat problematic. The social justice side of it is certainly the bedrock in the foundation of this plan. But even that becomes problematic in terms of … is every group that feels like it should be supported getting supported?

I’ve talked to a number of women who are in the cannabis industry, and they’re very distressed by the fact that the social equity portion says nothing about women. It doesn’t provide that there should be loans, or situations to allow women owned businesses to be able to get a head start. Will that go anywhere in terms of tripping this up? Again, I don’t know. But there are a lot of issues out there that we haven’t been hearing about. They’re going to have to be resolved before the program can get going.

Kris Krane:                          Is that a no?

Larry Mishkin:                    That’s a, I don’t think so. But I’d like to be wrong.

Bill Marcus:                        I’m going to be a firm no, but I’d like to be wrong. I think the bottom line, as Larry said, nothing gets done in this state without Madigan behind it. He has come out saying that he’s not in support of the bill because of the extensive nature of the felony expungement’s. Both the Sun Times, and the Tribune have come out and said, “We’d like to see it slowed down.” The head of the NAACP has come against it here, because they don’t think it goes far enough. With three weeks left in this session, I don’t see the state of Illinois moving that fast. Will it happen this year? In the next session? And is Pritzker’s goal to get this thing forced to a floor vote so that he can flush out everybody’s position? I think that’s probably more in line with his thinking as a business man. I’m going to say unless something drastic happens, and Madigan comes out and says, “Hey, this is what I want,” and he gets it, it’s a no for this session.

Kris Krane:                          And I’ll put myself on record as well. I think it’s a probably not. I also very much hope I’m wrong. But despite all the exuberance, no state has passed legalization through the state legislature yet, period. Vermont came closest. Some consider that legalization, I’d call it like super decorum. Basically it’s illegal to posses up to an ounce, to grow up to six plants, to gift it to friends. But there’s no legal commercial cannabis in Vermont. I think they will be the first state to do it. I think it’s going to happen this year in Vermont, because it’s another step. They’ve already taken that first step.

It’s really hard to get any semi-controversial legislation passed the first time it’s introduced. Because of all these issues that we’ve been discussing. There are constituents, there are representatives, there are representative constituents that have specific concerns that may conflict with other representatives concerns. Even if they in theory support legalization. It’s very hard to get a majority to yes in the first go round. It’s the reason why it hasn’t happened yet anywhere, despite the fact that nine states and D.C. have now voted for it. We’ve adequately demonstrated that the public is in support of legalization, but the legislature’s haven’t quite figured out how they can get consensus amongst the legislators to get it passed. So I think it’s a real uphill battle to get this done this year.

Bill Marcus:                        And this is Illinois, it’s very much of a, “What’s in it for me?” So everyone of these voting congressmen, and voting senators still has the opportunity to pass the hat around and decide what it is that they want out of this. I don’t think there’s enough time left for that to happen.

Kris Krane:                          Now to be fair though, they did get some of that already. Part of what governor Pritzker did, and part of the reason why they waited so long to introduce this bill was that they wanted to get the budget passed first. The budget has money allocated for pet projects all around the state that is tied directly to cannabis revenue. So if those members don’t then vote for cannabis legalization, they don’t get the money for their pet projects in their districts. Does that make anybody a little more optimistic or? It doesn’t make me, but trying to come around on the rosy side of this here.

Bill Marcus:                        I think it’s certainly a benefit towards getting a yes vote, but I just don’t think it’s enough yet. I think that there’s more than just $120 million of allocation of tax resources, and other things that these legislators are going to want baked into this bill. It’s an important bill, it’s going to get stuffed with all kinds of things before it’s passed, in my opinion.

Larry Mishkin:                    Well, the other thing is that he’s making all of these predictions about how much revenue he’s going to generate off the program, and the program hasn’t started yet. I think that was a problem when the medical program rolled out too. That I saw investors who would come in, and say, “We’re going to make this much this year, and this much the next year,” and the program hadn’t even gotten off it’s feet yet.

So it’s optimistic for Pritzker to kind of guess how much money he’s going to get out of this program. But given the slowness with everything else, I think it’s overly optimistic to suggest he’s going to be getting that much money initially.

Ally Marotti:                       I do think that most of the … I could be wrong about this, so correct me if any of you guys know, but I think some of the budget set aside that he had were from the licensing fees?

Larry Mishkin:                    Yes, that’s true.

Kris Krane:                          I believe that’s right, yeah.

Bill Marcus:                        Those weren’t budgets set aside, those were for the social equity program, right?

Kris Krane:                          Oh.

Ally Marotti:                       No, I’m talking about in Pritzker’s budget for 2019. He had … yes, he had some line items that he took directly from licensing fees for the recreational program. But doesn’t the bill say that there’s no new licenses that are going to be awarded yet this year?

Bill Marcus:                        No new one’s, but the existing license holders are still going to have to pay for their recreational license.

Ally Marotti:                       Okay.

Kris Krane:                          And even for [inaudible 00:29:18], let’s get into that. We want to talk about licensing. My understanding is we’re really not looking at new licenses for a year, right?

Bill Marcus:                        That’s my understanding. No new licenses for a year, for anything. $75 after a year for dispensaries, and $40 for craft cultivation, processing, and transportation after a year.

Kris Krane:                          Okay, so let’s say on the cultivation side first. So that’s 40 new craft cultivation licenses a year after the bill passes. What about the existing operators? Those get grandfathered in automatically?

Bill Marcus:                        That’s my understanding the way the bill’s written now, they pay their fee, and they’re automatically granted a recreational license with unlimited capacity.

Kris Krane:                          Mostly, yeah.

Bill Marcus:                        Yeah, devils in the details but generally speaking, there’s some qualifications-

Kris Krane:                          Essentially the idea is-

Ally Marotti:                       Have you guys read all 500 pages of the bill?

Bill Marcus:                        You’re lawyers?

Kris Krane:                          Flip the switch for the existing license holders, wait a year, then grant some more licenses. Which, look, there actually is a good public policy rational. I say this full disclosure. We are one of the existing license holders. Both in cultivation, and retail. I try not to speak out of self interest here, I’ve actually argued with my colleagues in a number of states on whether or not we should add more licensees. I tend to fall on the side of I think we should, and we’ll get into that in a moment.

But there is a policy rational for giving a headstart to the existing operators, right? Number one, they did take these massive risks at a time when the program was non-commercial, and it bled money for many years. So give them a little bit of a headstart to recoup some of that.

But the biggest one is they have the infrastructure in place. They’re already growing cannabis, and if you want the program to get up and running, and you want to provide cannabis to the public as quickly as possible, let the folks who are already doing it flip the switch, and start growing for adult use as well. They can get to market faster. Even if you start issuing new licenses right away, there’s still an administrative process. There’s still an application process. Then they have to go through zoning, and permitting. You have to actually build out. Plants take four months to grow. So even once you get plants in the ground … realistically, best case scenario, it’s a year after licensing starts before anybody else is really even online.

So the initial folks are going to have an advantage no matter what. Again, there’s a public policy rational for that. My question though is, is there going to be enough supply to meet demand in this market? Given how few new licenses we’re talking about issuing?

Larry Mishkin:                    I think with respect to demand, initially I’m not particularly concerned about that. Because most of the grower’s are not growing on anywhere close to the full square footage that they currently have. Because as it was accurately pointed out earlier, there just weren’t enough patients to justify that. It’s going to take a while for new cultivation centers to get up to speed anyway, so we’ll find out relatively quickly whether the current cultivators can do it.

The thing that we were all talking about that I’m a little surprised is, not immediately adding more dispensaries. Because some of the dispensaries that currently exist, certainly on the north shore, from time to time find themselves running out of product. Over marketed by people who are choosing those particular dispensaries, and I’m not sure that we can get by on 50 or 55 dispensaries for the entire state if we’re going to have adult use.

Kris Krane:                          We have 55 retail outlets for a state of 13 million people. And even though they’re going to grant 75 more a year later, again-

Bill Marcus:                        Those are not enough.

Kris Krane:                          … it’s going to be at least a year before those stores start getting open. If past is precedence for other states, it will probably be longer.

Bill Marcus:                        But I do think they have to protect against a rush of inexperienced operators flooding the market with product that has all kinds of problems. They don’t have the resources allocated. They don’t have the revenues to be able to police all of this. So I think there’s some concern around if we let too many people in too quickly, how are we going to manage the market as well?

Ally Marotti:                       There’s definitely some concern around that, I’ve heard from growers. The other thing to point out is that many of these big multi-state growers that are based here, and have operations here, have been expanding their grow facilities, readying for this since last summer.

Some of that was to prepare for the growing medical program, like we talked about earlier. If you think about these facilities, most of them in Illinois … I’m not sure if any of you have ever visited one, but there are these big unmarked facilities that just look like warehouses in the middle of nowhere. But many of them, when they started out, they did build outs, and had phases. And for many of them, they only had a few of their growing rooms open. They’ve been expanding over the past year to add more grow rooms. Build out the whole

Kris Krane:                          But even then, but let’s stay on this. So let’s say you’ve got basically 15 cultivators now, and a few of them have multiple licenses. So really 19 essentially that have licenses. So you’re talking about 190,000 square feet. Total canopy space, 190,000 square feet. Will that serve a market of 13 million people plus however many tourists come to Chicago every year? Is that enough?

Bill Marcus:                        So that’s 1.9 million square feet if they’re fully built out. 100,000 per-

Kris Krane:                          100,000 per, right.

Bill Marcus:                        So it’s 1.9 million square feet. It’s still, I don’t think is enough to support-

Kris Krane:                          Still, is that enough to supply the market?

Larry Mishkin:                    Kris, I’d like to throw that back at you, as a commercial grower, what do you think?

Kris Krane:                          I don’t think it is. That’s why I asked the question, I don’t think it is.

Ally Marotti:                       We’ve seen a couple of studies come out on this. There is a study sponsored by the industry. There is a study sponsored by the sponsors of the bill. One of the studies found that for at least the first few years, the current growers could supply. That’s because it takes a few years for a market to reach full maturity. I think it took Colorado four or five years, they say. I guess that’s where we’re at sort of right now with legalization in Colorado, four or five years in. I think it’s reached maturity now, maturity being full demand.

We hear a lot of stories about dispensaries selling out the first day that sales start. But also, something to consider is that the first day, the first week sales start, there’s going to be more sales than there would be even two months into the program. Just because there’s a rush. When a new store opens, when a new product is available.

The study that the sponsors of the bill put out there was done by a firm in Colorado. They did make a lot of comparisons to the Colorado market, and Illinois is very different. We have a larger population, it’s dispersed differently. There’s a lot of things to consider here. I think-

Kris Krane:                          And you’re not going to have 1.9 million square feet. Not all of those growers-

Bill Marcus:                        They’re not going to max out in the first year.

Kris Krane:                          Our building maxes out at 94,000 square feet, and that’s not all canopy space. That’s your total footprint. That’s the total footprint. So that includes the processing areas, and hallways, and everything else. It all has to fit within the physical building that we have. Are we looking at a major supply problem in Illinois if this bill passes as it currently stands?

Ally Marotti:                       I think that the biggest concern would be, and I could be wrong about this. Again, would be the dispensary side of things. Because that number seems way off to me from all the studies that I’ve seen. To only have 55-

Kris Krane:                          And then 75 a year later, which will take them time for them to come on line as well.

Larry Mishkin:                    We saw that in Massachusets when they first rolled out adult use. They only had, I think, initially three dispensaries-

Kris Krane:                          Two to start.

Larry Mishkin:                    … and none of them were located in major metropolitan areas.

Kris Krane:                          The first one in Boston just opened about a month ago. The Boston Metro area in Brookline.

Larry Mishkin:                    Right. But prior to that, you had people getting up at 3:00 in the morning to drive to these locations to get there before they ran out of product. I think it’s a natural part of-

Kris Krane:                          They all have limits in Massachusets, products. So if you go in as an adult use consumer, to buy cannabis at one of the legal dispensaries in Mass, at this point, still virtually everyone of them will have a limit on how much you can purchase that’s well below what the state limits are. It’s the only way they can keep product in house.

Ally Marotti:                       I think with dispensaries too, if you look at the map now from where the 55 dispensaries are located, the map of Illinois, there are some big holes. Part of that is because they were, I believe, a handful of licenses that were never awarded, or were awarded and the dispensaries never opened. Mission is the only one sort of on the south part of the city. So there are some holes there, even considering the population. Obviously in rural Illinois, there’s a population disparity there, but there are some holes. So that would be something else.

David Friedman:               I think erring on the side of caution, and Larry you’re the most legally trained here, if the program is going well, and there’s huge demand, can’t they amend this program at some point?

Larry Mishkin:                    Always. They could always amend anything.

Kris Krane:                          But that takes time. You got to issue more licenses, they got to build out. You got to recognize, it’s from licensure to opening, it’s best case it’s a year.

David Friedman:               What I think we got right here in Illinois, and I can’t underscore this enough, is I look at this room and I see maybe a couple of people of color here. Is that we got the disenfranchised right. That’s a big deal here to me.

Kris Krane:                          In the bill, you mean?

David Friedman:               Yeah.

Kris Krane:                          It’s not in the medical program.

Bill Marcus:                        That’s just the way that it is.

David Friedman:               No, in the bill, if that passes. We were talking about the odds of the bill passing, right? There’s other incentives. At some point, it might be one year, two years, four years out where demand meets supply, there are, I believe, those that read the bill, all 500 pages, some benefits including people of color, and disenfranchised in terms of lower fees. As well as I think lower taxation.

Kris Krane:                          Right. The bill’s trying to address the fact that folks from disproportionately impacted communities, primarily people of color, people from communities that are most targeted by the drug war, have an opportunity to participate in the new legal economy, which is something I think that everybody would admit the medical program did not do well. There’s very few people of color, very few women represented amongst ownership in the current medical industry in Illinois. And there’s a recognition that we need to create avenues to entry into the industry. Particularly when we’re talking about a drug war, marijuana prohibition that’s been essentially fought on the backs of young people of color. That there needs to be an avenue for these folks to participate.  I will say I’m skeptical that the provisions in the bill will really achieve this goal.

Bill Marcus:                        I agree.

Kris Krane:                          I think it’s laudable they way that they’ve done this, and frankly I’m not sure that there’s a way that they could write it that would achieve the goal.

Bill Marcus:                        Look, a 5,000 square foot facility-

Kris Krane:                          We’re talking about craft grows. How can a 5,000 square foot craft grower compete with 100,000 square foot-

Bill Marcus:                        Exactly. And how much of a craft grower market is there going to be? We got a lot of craft brewery’s in Chicago so-

Kris Krane:                          There will be a craft grower market. But the problem is most of the craft growers are not going to grow craft quality cannabis.

Bill Marcus:                        Correct.

Kris Krane:                          Especially because you have a small grow doesn’t mean you’re a great grower. So yes, the smaller growers that grow the best quality product, there will absolutely be a market for that product. But if they’re growing mediocre quality product, they cannot compete on price with somebody’s who growing in a 100,000 square foot facility. So that will make things very difficult.

My concern though is it’s expensive to get these businesses up and running. Even a 5,000 square foot craft grow is probably going to cost close to $1 million to get operational. A dispensary is still going to cost you, best case scenario a half a million dollars to get operational. Where does that money come from? The bill sets aside $20 million to go into a fund to help fund social equity applicants. That’s 20 grows at best, absolute best case scenario that will cover 20 grows.

So where does the money come from to insure that the social equity applicants can actually get their businesses operational?

Bill Marcus:                        And that’s why you have the … same they had in Oakland where you’ve got larger companies, and business in affluent investors trying to find minorities in equity participants to front for them. Then you have to start to police that, and in the application process, that becomes very difficult. You run into problems.

Kris Krane:                          Very difficult.

Larry Mishkin:                    Well, there were bonus points, if I recall, in the medical applications for-

Kris Krane:                          There were bonus points, yeah. It didn’t do a whole lot.

Larry Mishkin:                    Right, it didn’t do a whole lot. I don’t like to use the term social engineering, but part of what they’re trying to do here is create a solution … I admire what they’re trying to do, and I think it’s the right way in theory. But whether or not it can actually play out specifically, and create the type of opportunities that they want, we’ll have to see.

Ally Marotti:                       So this is just speaking from my reporting, this isn’t an opinion or anything. Many other states have started thinking about the social equity points when they came on line with their medical programs. Many states east of here, Ohio for example, New York, I believe. A lot of them built into their application programs, social equity points. They awarded points for certain things. They require companies applying to tell them how they would make sure their workforce was diverse, and layout that business bend from the get go.

Ohio, I believe, awarded a certain number of license to companies with diversity ownership, that sort of thing.

Kris Krane:                          Pennsylvania did a lot too.

Ally Marotti:                       Pennsylvania, exactly. Speaking with the law makers here when they were crafting this bill, they were saying, “Other states have tried, but no one’s gotten it right yet, and we want to be that state to get it right.” So some of the things that they were telling me was that … like you guys make good points, but also that’s having other licenses, having other types of licenses … so with the medical program right now, we have growers, and sellers, and that’s it.

So with the recreational program, there would be delivery licenses-

Bill Marcus:                        Transportation and processing.

Ally Marotti:                       … transportation and processing licenses. So that offers more avenues of entry into the industry. There are also companies here, Revolution Enterprises is one of them, that have already started working with folks that are in these opportunity areas, that are interested into get into the industry, and weren’t able to get in for whatever reason on the first time around. They’re helping to train them, just prepare them for the application process, which can take months to build a team to do that, train them on growing practices, and that sort of thing. Just to sort of help lower the barrier of entry.

So there’s a lot of industry operators that have already been thinking about this too. Again, take that with a grain of salt, because these are the big guys. And how would a new entrant ever be able to compete with a multi state operator at this point?

Kris Krane:                          I think what we’re starting to see … this becomes a very delicate balancing act, is this sort of partnership between MSO’s and social equity license holders. We’re starting to see this around the country. I’ve made the case, and shameless plug alert, I wrote a column for Forbes last year about how the lack of access to banking is particularly harming mom and pop owners, and social equity applicants.

If you are a license holder of say, one of … look, after they grant 75 licenses, we’re looking at around 130 retail licenses in a state of 13 million people. If you had one of those licenses, and this was not federally illegal, any bank in the state, any bank in the country would give you a small business loan, or a loan to get your business up and running. Access to capital would not be that challenging to someone in a market where licenses are so limited. But in the absence of that, where do you go for money?

I think we’re at a point now where we talk about how much more capital there is in the industry, and there’s a lot more capital we’ve seen come into the industry in the last two years. I would actually argue it’s more difficult for the mom and pops today to access that capital-

Bill Marcus:                        Completely agree.

Kris Krane:                          … than it was two years ago.

Bill Marcus:                        100%.

Kris Krane:                          Because you have so many operators that have so much experience. So if you’re a cannabis focus fund, or an individual angel investor, or a family office, which is where 99% of the money’s coming from these days. They’re going to be much more comfortable putting their money into a company that has a proven track record. Rather than to somebody that’s a start up that has to compete against these companies with a proven track record.

So right now, we’ve created a situation because of federal prohibition, and the lack of access to banking, where really the most viable source of capital for the mom and pop’s are the large players. That’s not inherently a terrible thing, if it’s done the right way. But it also can be very exploitative, and we’ve seen it done in a way that is not really beneficial for the social equity applicants where they really just do become front faces for the MSO’s, rather than the MSO’s empowering them to be actual entrepreneurs, and business owners in the space.

Larry Mishkin:                    I think you’re right, and I think what we’re really going to see here is that social equity can only go so far, as long as marijuana stays a schedule one. The elephant in the room, people have these conversations, but we don’t focus on enough is why is it a schedule one? Not the history, and all of that, but today-

Kris Krane:                          That’s another panel.

Larry Mishkin:                    Right. Today’s intelligent people who understand and know, and see why we haven’t been able to move this off of schedule one, and really off of schedule two. Once we can do that, and we solve the banking problems, that will solve these issues that we’re talking about. Because people will have access to small loans.

Kris Krane:                          So I think … Ally you have one more point to make, and then we’re going to open up for questions.

Ally Marotti:                       Sorry. I was just going to say that there’s also the folks here in Illinois that support opening up the banking system, but again, there are a lot of small community banks here that … a few that work with the industry now, but also many of them won’t touch it until it’s federally not a schedule one anymore.

Larry Mishkin:                    You have money laundering problems where these banks, and the bankers-

Ally Marotti:                       It looks like you’re [inaudible 00:47:13].

Larry Mishkin:                    Unless they pass the SAFE Act, which is currently before congress on the federal level, which would remove a lot of these restrictions in states that have programs. But in the absence of that, any banker who does the business, the individual banker, potentially faces criminal penalties.

So banks are very dis incentivized right now to do this. Again, if we take this off os schedule one, and schedule two, that problem goes away.

Bill Marcus:                        My daughter thinks that we’re an episode of Ozark. We spend all of our time trying to move money through the banking system. So now that the series has ended, they call me once a week to get an update.

 


Video StaffVideo StaffMay 15, 2019

63min2020

Tim Seymour:                    It’s really exciting to be here with Peter, who as you heard if you didn’t know Peter’s background. I mean this is a gentleman who’s been a pioneer in an industry that pioneering 10 years ago or even in 2014 was a lot more difficult than it is today. We had a chance to catch up in the green room and one of the topics just was a change in perception and how that’s really, really changed the playing field.

But before we get into that, I actually think it’d be very helpful, Peter, for the audience to hear a little about how you started out 10 years ago, because then I want to talk about Mettrum was one of the first real big transactions in the industry that inspired so many other operators to not only seek out major partners, but get going. I want to hear about that.

We’re here to talk about SLANG, because it’s been an exciting six months for your company. Start us just a little bit at the beginning of how you got here.

Peter Miller:                       Ten years ago cannabis was still this super illegal product almost everywhere. Probably similar us to today, but it was highly stigmatized, and obviously there wasn’t an industry. Canada had this grow for yourself model that was the result of a series of lawsuits where people basically said, “If Canadians have a human right to medicine and cannabis is medicine, then it’s a human right that we should be able to access cannabis.” That was a successful argument which led to the government trying to figure out how people would access cannabis. There was an RFP, a company that became Cannimed won that RFP, which is now Aurora, but ultimately it was new. They weren’t producing cannabis very successfully. There was another lawsuit, and the patients said, “We should be able to grow for yourself because not only can we not afford this, but it’s no good.” And that was successful.

Then there was this proliferation of quasi … well illegal if you were selling to anyone other than the three designated people you were allowed to grow for, and that created this highly distributed gray/black market in Canada. Fast forward to 2010, 2011, the governments trying to figure out how this should all be handled, and we had quite a conservative leader in power who wanted to just get rid of it, and his idea for getting rid of it was to commercially license a small number of producers that could be tightly regulated, carefully overseen and that was what was going to get rid of the riff raff in his view.

I was in tech, and my co-founder, Billy Levy, also was in tech, and we saw this is just a really interesting cultural moment, entrepreneurial opportunity and what the government really liked about us when we started talking to them was we knew nothing about cannabis, and we had no experience with cannabis, and in their view, if our business failed we’d go back to tech and we wouldn’t have the connections to put it in the streets.

Tim Seymour:                    Is that critical for anybody coming into the industry at that time? Was that the blueprint for, “I’ve never done this before and actually I’m a novice.”

Peter Miller:                       Largely speaking yes. There was a little lip service paid to a few people that were the absolute most proper participants of the old systems. There were a couple people, but really it was lawyers and bankers and tech people. People that had no experience, which was somewhat counterintuitive, but hugely beneficial to us. We applied. Successfully won a license in those early days, and that allowed us to draw early capital. We found another group that was also early licensed and merged entities and formed a company called Mettrum Health Corp. five years ago almost today. Time flies incredibly quickly. A few months after that, Fidelity led a financing to go public. It was the second company to go public in this space to Tweed before it was called Canopy Growth.

Tim Seymour:                    What was Fidelity thinking? I mean seriously. They had a lot on the line for reputation. When I think of Fidelity, I think of one of the more conservative financial institutions in the world. This doesn’t make sense to me.

Peter Miller:                       Yeah, and I think we might have been their first and last check to the space, mostly because it was an underperforming investment for a couple of years, but I think what they saw was that our team was a bunch of bankers, lawyers and tech entrepreneurs. Our chairman was the former CEO of TD Dominion Securities. Another one of our board members was the commissions of the RCMP. That would be like the head of the FBI here, and he’d just left his position as the head of Interpol, so we had a super cop, the banker, a bunch of tech kids who wouldn’t hurt a fly, and then we had an auditor on our board and it just read like the exact opposite of who you’d pull at a central casting for a weed business. That was like a lot of the folks. Bruce and Mark and the folks at Canopy. Similar profile.

Tim Seymour:                    Talk about how Canopy become essentially a partner, and ultimately your sugar daddy, but again, it’s a small community. Certainly back then it was even smaller. How did they view you, and ultimately for people that don’t know the transaction, what was the strategic element of this for them?

Peter Miller:                       By 2015, Justin Trudeau became Prime Minister of Canada at the very end, and that was really the catalyst.

Tim Seymour:                    By the way, Bruce is Bruce Linton, CEO of Canopy Growth. I don’t mean to be pedantic, but he is like Bono or Madonna, or Sting. They go with their first name.

Peter Miller:                       He’ll go down in history when they’re writing the book on legalization. He’ll be like the less controversial Joseph Kennedy, Sr. kind of guy who really was there at the beginning and jumped on the commercial opportunity post prohibition.

Once Justin Trudeau won there was this sense that legalization may actually take place. We went from trading 1,000 shares a day at $1.50 and no one caring, to all of a sudden a bunch of volume. The stock went for a run, and the first wave of MNA started taking place. It was a small world. It still is a small world generally, but in cannabis it’s extremely small. I think we’ve been good about not trashing anybody, because you never, you’re going to wind up being partnered with, bought by, pairing.

Tim Seymour:                    How would you trash them?

Peter Miller:                       It happens.

Tim Seymour:                    It’s interesting, and not to get lost on this, but in some sense, some of the Canadian LPs that have been the most successful have been the biggest targets just because their market cap has exceeded necessarily what people perceived to be a valuation that makes sense, but some of the biggest players in Canada, in some sense they take a lot of heat for having been pioneers and being very successful in capital markets even when their businesses haven’t been as mature.

Peter Miller:                       It’s a tricky situation and since Canada’s a federally legal environment it was able to attract certain capital that didn’t have to be worried about the whole state federal issue, so Canada punched above its weight capital markets wise, because there was a time, going back to our transaction, we competed. We were fierce, but respectful competitors, and as we were looking at the space, ultimately conversation led to, “This is a powerful combination.” We had a similar number of shares outstanding and the transaction was .8 to one share ratio, so it almost cut Canopy in half. All stock. People said we were crazy. People said they were crazy for paying $430 million, but anyone who held on-

Tim Seymour:                    Big transaction.

Peter Miller:                       That would be a couple billion more. More than a few billion today, because that was an $8-ish.

Tim Seymour:                    Where were you after this transaction, because again, you had built your company, and yet one of the great companies in cannabis history takes you out. What was either your role in the new entity, or how did you take what had obviously been an enormous success and really how do we get to SLANG, which ultimately is also the combination of bringing a couple assets together, which we’ll talk about.

Peter Miller:                       The early days of Mettrum Health Corp. was my bootcamp operationally in the space, and that took us to the US quite a bit for recon. Visiting Colorado, especially in the early days you got a sense that Canada, while it was ahead on legalization and the capital markets had a lot to learn operationally and brands wise. We saw products go from an unbranded jar of cannabis with the little label maker saying, “Super Lemon Haze” to vaporizers, to edibles, to more sophisticated things. We already knew that was coming. The interest for me was to be part of that.

After the Canopy transaction on a very friendly basis, Billy and I decided to focus our efforts on the US. Making investments personally. Continuing to foster relationships that we’d formed years earlier and put all of our weight behind the next wave, which we saw as consumer packaged goods. We got our 10,000 hours in that limited license vertically integrated environment, which was great, but really hard to scale, and it’s really hard to be a great farmer, a great processor, a great formulator of finished goods. Great marketer, great retailer. Usually people consolidate to that later, and sometimes they break stuff off as we’ve seen in other industries.

Our view is this is going CPG. We want to be part of it. That was an early idea two and change years ago, but we jumped on that and Canopy liked the concept, but they couldn’t put equity into the business so we created a unique structure that allowed them to have a warrant to buy equity if the federal law-

Tim Seymour:                    Changed.

Peter Miller:                       Allowed them to do so.

Tim Seymour:                    Sounds like something we’ve heard of recently. A transaction.

Peter Miller:                       Which was affecting the template for what happened-

Tim Seymour:                    With Acreage.

Peter Miller:                       With Acreage. Other LPs have quietly done similar things, or they’ve spun out assets with convertible warrant structures. That was early. We were proud to be part of that, and ultimately the following two years led to putting together the assets, the people that were the best of the things we saw and the people we knew, so as SLANG went public this January, and we were incredibly lucky that we were one of the few deals that went way above and stayed above issue, decent volume. The trends have come in our direction. It’s not like any genius on our part, it’s just timings worked really well.

Tim Seymour:                    This is happening at a time when obviously if you think about the fourth quarter of 2018, you had all the major US multi-states coming to market. They were RTO’ing, by the way. You decided to IPO. I mean talk about that.

Peter Miller:                       Yeah. Most people did an RTO in Canada, where they backed into a shell, or a CPC. We did a full prospectus, and that, I think inspired a lot of confidence in the more institutional investment world, and when we were raising money, especially in New York, there was a certain reticence to be part of a traditional Canadian cannabis RTO, and people were really appreciative of the fact we did a prospectus, which was a little more work at the beginning. A lot more disclosure, but cleaner and I think was part of why it was a successful [crosstalk 00:11:45].

Tim Seymour:                    Yeah, I mean if you think about that, I mean almost every one of those multi-state operators that RTO’d in the fall, not only was there a market decline. That was an exogenous factor to cannabis, which certainly impacted cannabis, but it clearly was a case where the RTO was becoming a bit of a stigma.

Peter Miller:                       Yeah, there were a few black eyes that the Canadian markets got from different reports of transactions that went down, or a couple years earlier, and just less transparency makes people less comfortable. I think that there were a lot of issues in the fall. There were macro things that affected those folks beyond their control. We waited that out and I think over the long, long term none of that will matter too much because the people putting a fundamentally good business together will be successful, but it doesn’t change the fact that on the days the stock is up I get no calls, and the days the stock goes down I get a thousand calls. I’d rather have more days when it’s up than down operationally.

Tim Seymour:                    Well, all I can tell you is the S&P’s down 130 basis points right now, so I’m sure cannabis is down four.

Peter Miller:                       Yeah, and eventually I think you’ll see maybe things go the other way because in CPG where we believe this all goes, Haagen-Dazs will do quite well relative to the lower quality ice cream, because it’s one of the last micro luxuries you get. If times are tough a $10 pint makes you feel pretty good for the little bit of time that you’re eating it in front of Netflix.

Tim Seymour:                    Indeed.

Peter Miller:                       I think cannabis isn’t going to be bulletproof in a recession, and certainly the capital markets and the fundamental business will obviously move in sometimes different directions. The long term they’ll catch up to one another, but I do think that we are all lucky to be their investors or participants or thinking about either one of those things in an industry that does have so many macro tailwinds globally.

Tim Seymour:                    I want to get to the capital markets world because I think there’s no question that a big part of the evolution of the industry has been the capital markets dynamics for better or worse. Let’s get to that. Ultimately I want to get down to the essence of SLANG and how you view yourself and in a world where you’ve created companies, you’ve certainly focused on consumer products, but you’ve been referred to as the conglomerate of weed, or a portfolio of brands. How do you think of yourself? For a company that really has some brands that you brought together right away, and maybe you start with the genesis of essentially the Organa acquisition and Firefly, and bringing together well-known brands, and saying, “That we want to add on expertise to and take it to the next level.”

Peter Miller:                       Yeah, we do have a portfolio of brands. As a collection they’ve done almost a few hundred million dollars worth of sales at the cash register. I differentiate cash register because ultimately that’s where you can tell how consumers are voting with their dollars, and that’s how you know where you stand. How we break out geographically, well we do have one product or another on the THC side in 12 states, and a hardware in all the states and a handful of countries. We do generate more of our business west of the Mississippi where it is more competitive, with Colorado and California being the biggest contributors, but also the biggest contributors just tracking the biggest markets for cannabis.

As a consumer packaged goods company, we’ve organized ourselves as such. We don’t own any cultivation. We buy biomass and we process it into finished goods under our brands and our formulations, and we don’t own any retail either. Not because we think it’s a bad business-

Tim Seymour:                    I’m guessing some of your partners, your strategic-

Peter Miller:                       Yeah, retailers are our partners so we’d be competing. What you see typically in the grocery business, or most retail is that chain stores aren’t carrying other chain stores private label brands. Your house brands aren’t going to carried by your competition, and so by not owning retail we’re in almost a few thousand retailer environments and the success of those retailers is our success and vice versa. We’re not cultivators, we’re not retailers. We’re really focused on procuring biomass, making our finished goods, and then wholesaling it and distributing it to end retailers, and that’s a model that we’re able to operate under because most of our business is in those more mature markets.

In a limited license, early stage market, you just can’t do that because they require vertical integration because that’s easier to regulate. Going back to Canada, it was a lot easier to say, “Okay, five people are licensed and you each do everything from seed to sale, so I can send three government officials to your facility every month, which was insane, but that’s what they did, and we can go through everything much more easily than if there were 1,000 of you.

But once the stigma goes away, people realize the sky isn’t falling. The data comes in. Car accidents are flat. Opiate deaths are down. Most importantly tax revenue is up and they say, “Oh man. How do we get more tax revenue?” Well the way you get more tax revenue is license more people, break up the verticals and generally create a bigger industry and that becomes the phase where our business model really excels, but even in those limited markets, which you can’t ignore because they’re incredibly exciting, like Illinois is going to be hugely exciting with the new regulation that was announced. We look for partnership. We’re not elbows out. We don’t think that we’re the smartest and we’re the only ones that are going to be able to pull this off. We look for good partners, and a good example of that is in Florida, where we said, “This is too exciting of a market to ignore.” Florida, on top of the fact that it is a large population, the data is showing us they’re big cannabis consumers, and that’s a limited license vertically integrated environment.

We had a lot of conversations and ultimately the largest retailer selling the most cannabis in the state was the company we ultimately decided to work with. They’re called Trulieve and the way we looked at the Florida market was we could either buy-in or earn-in. Buying-in is obvious. You buy a license or you buy a company that has a license, and we saw earning-in as saying, “Hey company X our brands, we can demonstrate, will bring people off the street into your stores versus the other stores. You can look at Harvard bus-

Tim Seymour:                    How do you decide on a Trulieve? What was it? I mean clearly they are market leader. They’re one or two in every segment, but as you assess again an earn-in, it’s critical that you choose the right partner. What was it about Trulieve as opposed to Vitacan or somebody else in Florida. What did you see?

Peter Miller:                       To put it really simply Trulieve sells the most weed. That makes them by far the most appealing person to us because that’s our goal as well. Also, Kim Rivers the CEO is an incredibly smart person and really good operator, and just runs that operation incredibly well.

Tim Seymour:                    At this point, because of the nature of the operators, do you have a wishlist of where else you guys think you want to be finding these partners, and again, partner in the truest sense of the word. Kim is somebody that stands out for people to know Trulieve. I mean it’s a very well run company. It’s a company that’s been generating higher margins. Got out of the gates early. Tell me how you asset partnerships? In the places you are not yet, what are you looking for?

Peter Miller:                       On top of the metric I just gave, you also have to look for people that are practical and thinking further into the future about how we can help each other. We were talking in the green room with the CEO of a multi-state operator, but how it is a big pie and there are going to be a lot of opportunities to win, and there’s no business model that I can say definitively is the business model for the short to midterm. We can see in the distance how this probably breaks down and we can apply margins and basic metrics from other industry to cannabis, but at what point is that going to be the case.

We look for people that are practical. In terms of the wish list, this is obviously one of the places that’ll be really exciting.

Speaker 3:                           How about Illinois?

Tim Seymour:                    Absolutely.

Peter Miller:                       Illinois is going to be a great market, but again, it already is if you’re in the black market. You can look at human behavior. It tracks pretty consistently in the western world. Even though reported cannabis use isn’t always as honest like Vermont to Alabama, but I bet if you test the sewers of all of these cities, the THC content in the aggregate urine per capita is super similar.

Tim Seymour:                    I don’t want to be doing that.

Peter Miller:                       I’m sure you have analysts for that.

Tim Seymour:                    You’ve gone out of your way to talk about SLANG as being a CPG story, and I’m sure everybody whose in this room has heard cannabis industry being described as, “It’s about brands. Brands matter.” Good, because that’s a second derivative conversation that I think we were not having even 12 months ago. People understand pricing power comes with brands, sophistication comes with brands. That truly that’s how you stand out, but I want third derivative. Peter, how do you compete where everyone who I talk to says, “We’re building the brand.” How are you endeavoring to stand out from the crowd? It just so happens you’ve got some core hardware and house brands that I think have become staples of the industry, and therefore they’re out there, but I hear everybody talking about brands all the time and that’s great because that’s what it’s about, but I want to hear how you’re going to compete with all the other guys that are saying it’s about brands.

Peter Miller:                       Yeah, I think there’s going to be a certain special sauce, but a lot of it is just the textbook CPG playbook. The head of our sales organization came from Konica Minolta where he was selling the most boring product in the world, the office printer and photocopier. Now in cannabis he’s been unleashed to sell something that people actually want, but he still applies the same sales methodologies. He’s organized his sales team in a similar way and I think you’re going to see better and better bench strength coming from the mainstream into cannabis as the stigma comes down. But, the brand also has to stand for something and be associated with something. If you think about the original brand as the hot iron you’d poke your livestock with. It was just to say, “This is my livestock. This is my product.” There’s a lot of people with brand, but nothing to poke it with.

Our brands have been in market for a long time, so part of it, another thing our head of sales likes to say is the best ability is availability. If your brand is in a lot of places, that’s how you create subconscious relationships with people. I’ve seen that before. I’ve seen it in all of these places. I’m trusting it a bit more. They develop then a relationship of purchasing it. Then they form habits. The first few trips into a dispensary starts very conversational. You might be in there for 15 minutes talking to a bud tender, but by the 100th time you know what you want, everyone’s busy. They just want to come and go, so I think just availability is super important.

But then brands typically do have to stand for something or be associated with something. Nike isn’t just a swoosh. That’s how you tell a Nike, but they did reinvent the sneaker in the 70s.

Tim Seymour:                    Innovation. I had those Air Jordan’s that you could pump up the back and they still had me jump about an inch off the ground, but nonetheless.

Peter Miller:                       Hermes is coming off of 200 years of craftsmanship. It’s not just an orange bag.

Tim Seymour:                    What is your ethos? What do people know about SLANG?

Peter Miller:                       Our 510 thread to be technical, but our cannabis vape is one of the first-

Tim Seymour:                    Explain the 510 thread for those that don’t understand the literal linkage here.

Peter Miller:                       510 is just a diameter in millimeters of the threads that you spin the cartridge onto the battery, but it’s the generic. It’s the USB standard thing for vaporizers. Lots of people have it. It’s almost an agreed upon form factor. We were the first in market with one of those a lot of years ago. It’s become very competitive, but our brand is based on both innovating in that space and then competing successfully in that space.

In March, we still had the number one selling 510 thread vape in Colorado after facing over 150 competitors that have come and gone over the past seven years on that product. Then on the Firefly side of things, we just are launching a new dry herb vape, but we were one of the first with a convection drier vaporizer, which I can get into a lot of technical mumbo jumbo, but basically it just allows you to capture a lot more of the flavors, a lot more of the cannabinoids. It’s more of a connoisseur product, which again, prices it higher than most people are interested in paying, but it’s based on innovating in that space, and it authentically delivers value to someone in the market that wants that.

We have products that have history. We have products that are differentiated. Debra has a report on the vape space, which you can look at.

Tim Seymour:                    That’s a fascinating report, by the way, which, if you didn’t know what 510 was before, you’re going to know what 511, 512 … I’m kidding, but the bottom line is, it’s become … First of all, I mean it’s a very competitive segment. You’re competing with not only Pax, but you’re competing with the entire content of China. You’re competing with … I see deal flow all the time, and half of them seem to have a vape element to what they’re doing.

Peter Miller:                       I mean on the supply chain we leverage China. We’re not saying that the 510 cartridge that it actually goes into, that’s a piece of hardware we’ll buy from a third party. What’s inside it matters. If we all agreed that this is the size of a beer can, you’re no longer competing on who has the cheapest, best can. It’s more about what’s in the can and how you describe the relationship people have with what’s in the can. That’s how I see the 510 thread side of things going.

Then with Pax and the proprietary battery and cartridge model, there’s a bit more of a technology angel there, but we’re starting to see, even with the proprietary stuff, Pax and everybody else, the sales are basically equal to the high end formulations of the 510 category. It’s going to be very competitive, but what we like, and a better model is that we’ve been competing.

If you go, again, to Colorado, Oregon, California, Washington, all these places. It’s highly competitive, so when we’re looking at acquisitions, we really like management teams that have succeeded in those markets, because they’re like athletes that have trained at altitude. You bring them down to sea level and they have that extra edge because they’ve been just duking it out. Not to say that-

Tim Seymour:                    A vape, or a cartridge that’s been particularly successful in California, which is the most competitive market. It’s the largest market in the world. That’s the guy you want.

Peter Miller:                       Yeah, from a management standpoint, and I think we’re all witnessing a shift in brand trends from the giant monolithic top down brands like Craft and whatnot, to the more regional plays. Just generally speaking, and it’ll happen with cannabis too. There’s a certain regionality that people are drawn to and so, even if you have a 510 thread vape in Colorado that’s really popular, it doesn’t mean it’s automatically going to be welcomed by the Washington market, or the Oregon market. Especially the Oregon market who really does care about the local craft story at a good price. That’s why in our portfolio we’ll have products that technically have similar characteristics in Colorado and Washington, but they address totally different markets, and we don’t see them as overlap and they’re both doing incredibly well.

Tim Seymour:                    Not only are we talking about geographic, but we’re certainly talking about consumer demographic targets too right? We’re talking about different price points, and I do want to hear about the Firefly 2 Plus because that’s a Rolls Royce that’s rolling off the assembly line soon. Talk about that. I mean you’re addressing different demographics, and yes, the consumer in Colorado is different than the consumer in Illinois. How do you view that?

Peter Miller:                       The vape category now segments pretty clearly because it’s mature enough that you’re starting to see these trends. When any of these-

Tim Seymour:                    In the Green Market on page … It’s very interesting.

Peter Miller:                       Exactly. Since it does become, at maturity, almost as big as bud, and it’s hard to say at maturity, but today, if you looked at last year in California, flower made up about 40% of the market, pre-rolls were 8% of that, and so you’re seeing a 32% pure flower that you grind up, roll up and smoke, or put in a bowl and smoke, or cook into food. Whatever the case may be, that’s flower. Then if you looked at vape it was around 30%. Almost neck and neck, and so what you’re seeing in-

Tim Seymour:                    And growing at a faster rate.

Peter Miller:                       Growing quickly-

Tim Seymour:                    Figuring that’s 40s.

Peter Miller:                       It might be the dominant sector, and it’s segmented a few ways. You actually see premium priced vaporizers, both on the oil side and on the hardware side. You see the discount stuff. You see the value stuff in the middle. You see specialty and we address all of those markets. The Firefly on the dry herb side is a Rolls Royce. It’s not going to appeal to everybody, but the same people that … Like my father-in-law will buy a bottle of wine, he’ll tell us about it for an hour, and then he’ll pour it through a crazy system of God knows what. There’s a bunch of hissing sounds, and out of the bottom he spins it. He really cares and knows what he’s talking about in that way, but a lot of people I know buy boxes of wine and pour it into a Dixie cup and it’s just a different buying pattern. In vape, the Firefly is definitely catering more to this crowd.

Tim Seymour:                    I’m guessing this group of people care about the Firefly too and a dynamically heated with every inhale in a titanium shell. This is the kind of stuff that I think people are paying attention to.

Peter Miller:                       There’s better mousetrap components to it. The temperature curve does align to capture all the cannabinoids along the spectrum because it’s not just THC, and as the market evolves and people get more sophisticated. Now the CBD gets a lot of attention, it’s a dominant cannabinoid next to THC. Totally different effects. Symbiotic in a lot of ways, but there’s other cannabinoids as well, and they all decarboxylate at different temperatures, and having a temperature ramp that allows you to capture them all, as well as the turpines that provide the flavors, which also have a lot to do with the effect, the volatilize at different temperatures, so a product like the Firefly 2 Plus helps you really get that full connoisseur experience. We’re also extending that brand-

Tim Seymour:                    Who else is doing that? I mean this sounds to me, especially again, and the technology behind truly heating the product to the level that truly brings out the optimal impact. First of all, how are you testing for that, and ultimately how long did it take for that product to come off the assembly line?

Peter Miller:                       The product was developed by a guy who left Apple to start Firefly a handful of years ago, and while he will often bring up the value of the stock options he left behind leaving Apple 10 years ago, he did create a beautiful and highly technically capable product, and not a lot of people have created these convection dry herb vapes because of that complexity, and because the consumer that uses it has to be a bit more sophisticated. There’s a lot more competition in dry herb vape on the conduction side, where it heats more like an oven for a couple minutes, and then you inhale. Pax does an incredibly good job with that. There’s a handful of others. As the dry herb category maxes out, I think you’ll see that not flatten, but you’ll have your market. Rolls Royce isn’t selling a million cars a year.

Then, if you go down the exact opposite end of the spectrum, more to the distillate side of things, we have a product that’s growing like gangbusters in California, but a lot of that just has to do with the fact that our supply chain is tight and we’re able to pull the price lever and convenience for people. A company that did that extremely well, better than anybody was just acquired by CuraLeaf last week called Select. A distillate based product. They just did an amazing sales job, organized their supply chain well, pounded pavement, were incredibly aggressive on pricing. Would nearly consign product, and built an awesome market share.

Tim Seymour:                    A lot of people, when you start hearing about the technology behind the vaporizer, I think people also mistakenly believe that this is a place that the tobacco company will come in and that there’s some transference between an e-cigarette and essentially vaping, especially a dry vaporizer. Break that down. Talk about why you’re not terribly concerned about Jewel or anybody else that seems to dominate in the tobacco world right now.

Peter Miller:                       The important thing you hit on is that the early cannabis vaporizers were just repurposed e-cigarettes, so they all ramped to 600 degrees, which would be optimum for nicotine, but not so much for THC. You’ll capture all the cannabinoids by 422 degrees, which is funny, but it’s not 420.

Tim Seymour:                    Not 420.

Peter Miller:                       We would have set the temperature to that, it would have been funny marketing, but we wouldn’t have had as high quality a product. The purpose built cannabis vapes, there aren’t many of them. With big tobacco, they’ve placed their bets. Altria made a big investment in Cronos, another Canadian licensed producer from early on that went through a few ownership groups, but now is Altria’s bet. Pax has a certain DNA from when they were Pax Labs before they spun off to be Jewel and then Pax Labs, and I think it’s just a fundamentally different experience and use case. Tobacco versus cannabis. The only similarity is that the dominant way to consume historically has been historically, but that’s pretty much where it ends. Totally different effects, both positive and negative, although I shouldn’t say there’s any positive, but I mean there is scientific arguments for nicotine in a well rounded-

Tim Seymour:                    Yeah, but typically people go out to consume an entire cigarette, whereas, the ideal dynamic, or at least part of what the dry vaporizer is solving, and solving from a efficiency of use of product, by the way, some very expensive products that you don’t want to really burn through too fast, but sometimes people puff and wait, and puff and wait and come back in 20 minutes, and you don’t smoke a cigarette like that.

Peter Miller:                       No, exactly. It’s more social in some ways. It’s also more personal in a lot of ways, and yeah with the Firefly Mini, not to keep hawking it, but I will because that’s my job.

Tim Seymour:                    Why not.

Peter Miller:                       It does lend itself to that stop and go. It heats up in a few seconds. You take your puff. You put it down. Hasn’t destroyed the product because it hasn’t heated it up like an oven, and so that is certainly a use case that’s different tobacco to cannabis.

I think what we’re seeing broadly speaking is big alcohol saw cannabis as a threat. We’ve talked to everybody you can imagine, and some of them are more candid than others about how they’ve been talking about cannabis in board meetings for over a decade. They still don’t know exactly what their move is, but the dust cloud on the horizon is now like a stampede you can see coming right at you, so a lot of people are trying to figure out where they should stand, so you’ve seen some big alcohol partnerships with cannabis. You’ve only really seen the one big tobacco partnership.

You’re seeing some pharma stuff. If you looked at what cannabis generally could address, whether it’s CBS, whether it’s THC, whether its other cannabinoids, you’re addressing a multi hundred billion rec market. You’re addressing a multi hundred billion sleep market. A multi hundred billion pain market. The list goes on. That just also goes back to the opportunity sides for all of us and how it’s not going to be like ride sharing where there’s only two apps I want on my phone, or social media or search. It is a far more open market to more participants, more opportunities to win and this whole cannabis fad isn’t going to blow over. They’ve been using it for thousands of years. It’ll be used for thousands of years into the future, and there’s this market opportunity that’s taken place due to regulatory shifts, but I don’t see that ending either for a long time because at some place in the world, they’re still going to be very strict on cannabis for a long time. It’s hard to go from beheading people for it to full legalization overnight. We’re coming off a much less aggressive position in America, but still it hasn’t happened overnight. I’m sure my parents, and their friends were talking about how cannabis was going to be legal any day now in the 50s and 60s and that didn’t play out for a long time.

Tim Seymour:                    It’s funny you bring up the rest of the world. Why don’t we just go there real quick. It was going to be part of my fast fire.  Let’s do a little fast fire. This is where I just want to ask Peter a phrase or something, and Peter’s going to quickly give me his first thing that pops to mind. Doesn’t have to be one word. It can be anything, but most interesting country in the world outside of North America for cannabis right now?

Peter Miller:                       I mean if Mexico doesn’t count, I would say that they are talking broad legalization, which is interesting. I think western Europe is going to play out a lot like the US, but since the EU can move a little more quickly together it will do so. Germany has been interesting already for us, so I think western Europe’s hard to pick down. Germany’s probably the most interesting today.

Tim Seymour:                    Acreage Canopy deal. Your thoughts.

Peter Miller:                       I think it was great for the sector to see Canadians using their paper, using their position to make bets on the US. I think it’s currently facing a little bit of a tussle with the fund that came out against the deal. I think we’ll see the confidence level people have in the deal in terms of how closely the stocks trade to the deal price. Right now it doesn’t seem like the confidence is huge, but I think it gets done, and I think it’s going to be great for everybody.

Tim Seymour:                    Who’s your cannabis idol?

Peter Miller:                       It’s incredibly tough. There’s capital markets people that have paved the way massively like Bruce. There’s people that have paved the way in the culture that have taken a lot of risks. Even the people that some people like to make fun of, like the Tommy Chong’s and the Cheech and Chong jokes and the list goes on, but I think the DeAngelo brothers at Harborside did a huge job for the industry period, never backing down, so it would be incredibly hard to pick. But the celebrity, the capital markets, the activist crowd have all done their piece.

Tim Seymour:                    States act. State banking? Time? Any way you want? When you hear that, what does that mean to you?

Peter Miller:                       I think State’s Act means liquidity to me. The banks get comfortable. The exchanges get comfortable. The institutions get comfortable and then there’s a ton of liquidity in the space that isn’t there today.

Tim Seymour:                    Put your investor hat on, one of those folks, because we know where you sit, but public or private right now? Where should people be?

Peter Miller:                       Depends what your time horizons are and what your risk tolerance is. You can invest in a public O through financings that come out every few months, usually at a discount to the price, and with some of the bigger names you can hedge it, and so if you’re faster money you obviously have a lot of options in the capital markets. If you have a longer term view there’s some interesting privates you can play as well.

Tim Seymour:                    Difficult question, as you sit as a CEO, but single state or multi state operator? What’s the best model?

Peter Miller:                       For us, we were the original multi state in a lot of ways because we’ve had products in multiple states, and depending how you define operations, operations in multiple states. I think what people usually talk about is they talk about vertically integrated limited license, and they say MSO, and then there’s the competitive states. We personally prefer the competitive states for a lot of reasons, some of which I got into.

As an investor though, I think the MSOs represent a good momentum trade because people have muscle memory, and the Canadian trade was so rich when it was limited license vertically integrated and you saw Canopy go from 89 cents to $70, and it has a much more similar business model to a Cresco. I’m not going to give you stock ideas, but I think you can’t go wrong with MSOs.

Tim Seymour:                    I agree. I agree. Next big strategic in the sector? Who’s going to splash in? Whether it’s a Constellation style that may never be done again in terms of the relative size to the industry, or to the players itself, but whose next? Hazard a guess?

Peter Miller:                       I think it’s going to be one of the non alcohol CPGs. I’m not sure which, but Buffett was bobbing off at his conference last week about how it would be a mistake for Coca-Cola to get involved in cannabis, although they actually bought a company that had CBD water a couple of years ago, so obviously not too deep in the weeds of his investments, but I think it’ll be someone more like that then it will be another big alcohol company.

Tim Seymour:                    Coca-Cola not close? I’m asking?

Peter Miller:                       Yeah, they bought a company. I think it was called Dirty Lemon, or something, and they had CBD in the product. They removed the CBD. This was pre-pharm bill. I’m not sure if they put it back in. They’ve dabbled. I think Unilever is going … I’m not going to tell tales out of school. I think there’s going to be a lot of people doing things in CBD initially. Already there have been announcements. I think it’ll be a big CPG player that is non alcohol.

Tim Seymour:                    Somewhat related THC infused beverages as a market segment. Exciting?

Peter Miller:                       THC infused beverages get a ton of attention. I think CBD infused beverages might be a bigger opportunity near term. I can say the reality of the situation is, and this is someone who has a beveraging market, is that in California, it was 0.8% of the market last year. It’s never more than a percent of any mature states market, but it’s getting a lot of attention. Huge investment, and there’s a bit of a gap between the reality and the possibility. We have to let data decide what we’re going to put resources behind. Vape and edibles represent more than half of the entire industry, so that gets half at least of our attention.

Tim Seymour:                    Constellation isn’t in this to suddenly be the Corona of THC beverages?

Peter Miller:                       I don’t think so. I think Corona and a lot of these folks are in the lifestyle business. The mood enhancement business, and if someone’s on the beach with a Corona and a joint, they want a piece of the action in both hands. They’re not going to make you put the joint in the Corona and shake it around and drink it back. That’s gross. I mean it’s a decent ashtray when you’re done.

Tim Seymour:                    Probably been done actually.

Peter Miller:                       Probably. Yeah, someone whose had a few too many of both, but I think that the big alcohol companies probably see this as, “Yeah, it doesn’t have to be the round peg in the square hole.” They’ll go where the market goes. The data will guide you and you can’t force things into existence the market doesn’t want. Hopefully they want it though eventually.

Tim Seymour:                    We’ll end with this. The future? The future for SLANG? The future for the industry? It’s not a one word answer so I’ll give you a second.

Peter Miller:                       Yeah, I mean the future at the highest level is that people will be consuming more cannabis in the future than in the past as long as there isn’t some massive population like Malthusian check, but I think cannabis consumption is going to continue. Legalization I expect will continue also for so many reasons from tax revenue to social justice, all the way down.

I think in the actual business environment, the models will shift more to the real world economics. You’ll see more of the CPG focused guys, the retail focused people, the cultivators and all of those verticals will be compelling to different investors for different reasons. I think for SLANG, we’re going to continue running our playbook as a branded product focused company. You’ll see us making more acquisitions to develop the portfolio with a regional focus, as well as a category focus, and I think that for all of these companies that do a good job regardless of any market ups and downs, they’ll be very successful.

Cannabis gets compared to tech sometimes. There’s obviously some major differences, but in the sense that they were both big waves that took place, you saw Amazon start before the dot com crash and live through it and be one of the most successful companies in the world. There’ll be cannabis companies that fail. There’ll be more that fail than succeed. People talk about the green rush. They don’t talk about the green flush where most of these companies aren’t here, but the good ones will be, and they’ll be bigger and better, and if you’re in this industry, you’re incredibly lucky to be part of an industry that has this secular trend of growth. If you’re just a cannabis consumer, you’re incredibly lucky that you’re not going to have your life ruined by a small arrest and conviction for possession, and you’ll just have an availability of more product generally. I hope we see destigmitization. The market will expand. That’s my crystal ball.

Tim Seymour:                    Great. Future sounds bright. Peter Miller and SLANG Worldwide. Thank you very much.

Peter Miller:                       Thank you. Appreciate it.


Video StaffVideo StaffMay 10, 2019

2min1630

Just days before the Green Market Summit in Chicago on May 7, Illinois Governor Pritzker announced his plans for regulating adult-use cannabis. While some in the state weren’t really sure whether full legalization would happen, the news made it become very real, very fast. As a result ticket sales for the summit took off and the event hit capacity.

Attendees were impressed at the quality of the executives that attended. One person said, “I can’t believe I got to speak to Peter Miller, the CEO of SLANG. I wouldn’t get that chance at another conference.” Another panelist left saying that he believed he had sold two dispensaries as a result of the conference. A sponsor of the event said it gained five new clients.

Each panel was videotaped and are currently being edited. They will be published over the next two weeks. If you weren’t able to attend the conference, this video will give you a taste of what you missed. More events are being planned throughout the year. The Green Market Summit is building a reputation as an event where attendees really get to network and develop meaningful professional relationships, while the sponsors add business.


Video StaffVideo StaffMay 3, 2019

3min3920

Green Market Report just learned that one of the sponsors at next week’s Green Market Summit is going to be announcing a new product at the conference. This is going to be huge news. We still have some room left, but there is a limited about of seats. Get your tickets before it’s too late.

Curaleaf announced this week that it was acquiring Cura Partners, known for their Select brand in an all-stock deal valued at $948 million. Select ‘s THC products are sold in more than 900 retailers, it is the leading cannabis brand in key Western states. The combination of the two companies will give Curaleaf a leg up on the West Coast due to Select’s brand strength.

Canopy Growth had another busy week. It acquired a German synthetic cannabis company called C3 for $250 million. Which seems a bit odd for a company that prides itself on its plants. But really it’s buying entry into the German market. Canopy also gave an update on its NY hemp plans in which the company plans to begin hiring later this year.

CannTrust priced its previously-announced public offering of 36 million shares at $5.50 per share. The company is selling 30 million shares for total gross proceeds to the Company of approximately US$170 million.

iAnthus raise $25 million selling convertible notes.

KushCo Holdings, Inc. (OTCQB: KSHB) announced that it has entered into a definitive agreement with an institutional investor for a private placement of $21.3 million.

Lots of earnings this week.

Sunniva Inc.  (CSE: SNN) (OTCQB: SNNVF) reported its fiscal 2018 results for the year ending December 2018 in Canadian dollars. The company delivered$18.8 million in revenue versus 2017’s $16.1 million.

Golden Leaf Holdings Ltd. (CSE: GLH) (OTCQB: GLDFF) has reported its financial results for the 2018 fiscal year. Full-year revenue was $16.5 million, up 43% from $11.5 million in 2017

Plus Products reported that its 2018 full-year revenues increased by 681% to $8.4 million versus the 2017 revenues of $1.1 million.

Indus Holdings Inc. began trading on the Canadian Securities Exchange under the symbol INDS.


Video StaffVideo StaffApril 26, 2019

2min6370

The Green Market Summit in Chicago is on May 7. We have an amazing lineup. You will hear from Peter Miller the CEO of Slang Worldwide as he dives into building top selling brands in the crowded vape space. We’ve got Cresco Labs talking about building a national brand, MMLG Brands brings their consulting secrets to the stage and Cresta Management will be talking about hiring and recruiting for cannabis companies. It wouldn’t be right to come to Chicago and not talk about commodity trading in hemp. We’ve got Jonathan Rubin from Cannabis Benchmarks to talk about wholesale hemp pricing. Buy your tickets now.

This week was fairly quiet compared to last week’s news cycle. We have some earnings to cover.  Cresco Labs reported fourth-quarter revenue of $17 million, a 441% increase and the company reported a profitable year for 2018. How many cannabis companies can say that so early in the game?

Harvest Health & Rec reported $16.9 million in revenue for the fourth quarter an increase of 135% over last year.

CannTrust also reported preliminary earnings of  $17 million in the first quarter and also announced that it has begun a $200 million offering.

SOL Global, the owner of Florida’s 3 Boys Farms, entered into a binding letter of intent with Merida Capital Partners 2019 to acquire Merida’s Michigan subsidiary, MCP Wellness, Inc. in a deal valued at $150 million. Interestingly enough, a separate company that Merida invested in New Frontier Data filed a defamation lawsuit against SOL Global’s CFO Andy Defrancesco. That could certainly get awkward very quickly.

Ionic Brands acquired edibles company Zoots for $855,000.

MedMen got its first tranche of money from Gotham Green and it was $20 million.

Pax Labs said that it raised $420 million – see what they did there? The company says the post-money valuation is now $1.7 billion and the company is expected to go public soon.


Video StaffVideo StaffApril 19, 2019

2min5440

The big news this week was the acquisition of acreage holdings by canopy growth in a deal valued at $3.4 billion. Following approvals from shareholders, acreage will immediately get $300 million and ultimately access to Canopy’s Tweed and Tokyo Smoke brands. Acreage also entered the Nevada market this week with its acquisition of Deep Roots Medical bringing the company’s state footprint up to 20 and making it the largest cannabis company in the U.S.

NASDAQ finally approved a US-based cannabis related company to list on its marketplace. Vape distributor Greenlane Holdings upsized its IPO and priced the shares at $17, above its planned range of $14-$16. The symbol is GNLN. The company reported revenue of $178 million in 2018.

Aphria reported its earnings with a $108 million loss and once again rejected the Green Growth acquisition. Aphria also priced $300 million in convertible debentures this week.

Horizons ETF announced it was launching a US-based ETF that began trading on Thursday using the symbol HMUS

iAnthus will be selling CBD for Life products in Urban Outfitters.

Of course, it’s the big 4/20 celebration this week. This year the April 20 holiday falls on a Saturday for the first time and coincides with Easter Weekend. All of the data providers are projecting big sales on Friday and Saturday as many dispensaries are running promotions and legal states are hosting events.

The Green Market Summit is on May 7 in Chicago. This exciting conference will feature panels on hiring and recruiting in the cannabis industry, a review of hemp pricing in preparation for futures trading and a deep dive into the vape business of Slang Worldwide. Visit www.greenmarketsummit.com for tickets.



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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