Welcome And Market Context

AnnaRae Grabstein 0:02

Awkward silence.

SPEAKER_02 0:15

Welcome everybody to this week and cannabis live. I am Jay Rosenthal. We're here with like a full slate today. Anna Ray Grabstein, Ben Larson, Markhauser, Jeremy Berg, and special guest Judson Hill, the market president for Fine Fettel in Georgia. And we're going to get to that in a second, but I am also not in my normal place. That is the CN Tower. I am at the Canadian Securities Exchange for another project that you'll run next week with the CEO of a company up here. So thank you all for joining us here. We're streaming on multiple platforms across the internet, across the World Wide Web today. So thank you all

DEA Registration Portal Update

SPEAKER_02 0:49

for joining us. If you're joining us online, um, there's a lot happening. Uh and uh there were earnings. There is uh, well, uh Anna Ray, we're gonna start with you because last week, while we were doing this, you broke news that said the DEA was receiving or about to receive applications for the next round of people to register. Has that happened yet, aside from dispensary owners and operators?

AnnaRae Grabstein 1:14

Not that I'm aware of. And I think breaking news is is maybe a little more flattering than it was, but I did announce that the DEA seemed to have updated their website. And if that counts as news, uh maybe maybe when the government does anything, it's news. And there has been more going on with the government uh recently.

Ben Larson 1:31

They updated their website by saying that they were going to be updating their website.

unknown 1:36

Exactly.

AnnaRae Grabstein 1:38

But it it does seem to be getting closer that the supply chain businesses are going to have a new portal and place to start applying for their own registration. And Cultivated put out a great piece about this uh this week from Chris Satya.

SPEAKER_05 1:54

Yeah.

SPEAKER_02 1:54

Jeremy, you want to talk about that?

SPEAKER_05 1:56

Yeah, no, Chris's piece is really good. I think um, you know, some of the interesting details in there that that have been discussed on social media that we haven't really discussed yet. Um, you know, are the are the gotcha questions? They seem to be uh the same for everyone who wants to register with a DEA. Um has the applicant ever been convicted of a crime in connection with controlled substances under state or federal law? Um, you know, has any officer of the corporation been convicted, et cetera? Um so you know, the whole thing is a little bizarre. Like, of course, you know, the DEA takes the most law enforcement angle possible on this. At the same time, I think it's a good sign that the registration is opening, you know, for more businesses and more parts of the supply chain. It means things are moving. Um, but you know, I think the thrust of Chris's story was regardless of your feelings or thoughts about the question that are sort of gotcha, fill them out appropriately and accurately because you really do not want to mess uh with the federal government on this. And so uh that was the legal advice that came through in Chris's story. Um, you know, so I I think it's a pretty interesting dynamic, to say the least. It'll be interesting to see how it unfolds.

SPEAKER_02 3:04

I hadn't thought of this till this just this very second. And Mark, this goes to your point that you always say that drugs are hard. But um, you know how you had to pay. Drugs are scary. Drugs are scary, yes. Um, you know how you had to pay for that registration with PayPal? I wonder if I wonder if that PayPal account got shut down because the people paying were associated, just like we got shut down with Chase, like people paying were associated with cannabis businesses. I wonder if that is sort of one of the hang-offs is they can't figure out how to take payments from cannabis companies without getting shut down. I hadn't thought of it, but not out of the realm of possibility.

SPEAKER_05 3:37

Well, there's a reason it's not Stripe, right? Um, because Stripe will not work with the industry. And and you know, PayPal's, you know, KYC, I guess, is just a little bit, you know, less rigorous than Stripe, and so they'll they'll do it. Um, but it's it's bizarre that that the federal government is using PayPal to do this. Right.

SPEAKER_03 3:54

Uh yeah. You can you can ACH your your your income tax payment or IRS. Right. So it really doesn't make any sense.

SPEAKER_02 4:03

Yeah. I mean that's just a small point, but I actually haven't thought about yet. I wonder everybody's getting their the the government's getting their

Gotcha Questions And Payment Weirdness

SPEAKER_02 4:10

PayPal taken away.

AnnaRae Grabstein 4:11

One thing worth mentioning is that while everyone's rushing, or some folks are rushing to register and some aren't. But uh what isn't clear is the fees that are going to be levied once the registration is granted and when you're gonna have to pay them and how high they'll be. They have they have published sort of estimates or when fees might be levied, but not what the final amounts will be. And and this could have some significant impacts on businesses if if it ends up being that that that you can still not pay 280e without registration if you're not conducting interstate commerce in your state, that some people are having to pay fees because they registered and some people aren't having to pay fees because they chose not to register. And that could create some complication, but it has yet to be seen. The fees are not active yet, but they're coming. The government's gonna get theirs. Yeah.

Ben Larson 5:08

Yeah, um, though, that was my big question. Is like, what if you're just a medical marijuana company, so you're still fee, but not DEA registered and not doing anything different than you currently are in your state systems. And to your point, there are these. There's like, I think for manufacturers, it might be as high as three or four thousand dollars, and then there's the federal tax on on biomass. Uh I think I saw something around like $113 a kilogram. So it's like, what if you just don't register and don't plan on doing interstate commerce?

SPEAKER_03 5:44

Well, and and remember, interstate commerce isn't opening up necessarily. Well, that's my point. Yeah, you know, everybody's here. It seems to be this sort of I think it's a mis. I'm not saying that you all are misunderstood, but I hear this a lot recently, and it's just, but it interstate commerce is not necessarily opening up. And I think all of this is just indicative of the fact that all of this, so much of this is still such an unknown. And that's why I think you don't we it's been what a couple

Fees 280E And Registering Dilemmas

SPEAKER_03 6:15

of hundred reported applications so far? That's not that many.

SPEAKER_01 6:19

It's funny, I was actually.

AnnaRae Grabstein 6:21

Let's say did you register? Let's say you.

SPEAKER_01 6:26

Yes, we did. I was actually catching up with Ben last week before the new Georgia News. Um, and we did register with the DA, whatever it was, two or three weeks ago on the first day it was open. So quite a swing of events here in Georgia between the rescheduling news and um our Georgia local policy. Uh so we are now in the process of being DG DA registered more for the purpose of design of 280.

SPEAKER_02 7:01

I'm I'm I'm losing Judson a bit. Um but also we stepped on my um my intro, which was the devil went down to Georgia. Um and then I also realized Judson, are you back? I also realized that that emoji can be considered as other things, but that's we're talking about Georgia and Judson Hill from Fine Fettle in Georgia is here. Judson, I think you're back. Give us a bit of what happened this week in Georgia, because I think I mean it is monumental, which is why we wanted to have you on, but also you're the best person to talk to about.

SPEAKER_03 7:28

Yeah, and and also tell us what Fine Fettle is. You can submit it on your background too, please.

SPEAKER_01 7:34

Yeah, of course, and I appreciate y'all having me. Can you hear me now? Yeah, cool. Um, well, yeah, obviously, I know everyone here from all over the past 10 years. It's great to see everyone. Uh, fine fettle, we are one of the

Georgia Signs SB 220

SPEAKER_01 7:50

six licensed operators in Georgia. Um, so we're fully vertically integrated and only a medical operator in Georgia to the uh rescheduling point. And the big news this week is that our bill we've been working on the last two years, SB220, was signed into law by the governor. Um, if anyone saw the signing statement, it was a bit begrudgingly and very clear that they don't want recreational cannabis to be the outcome of this. But uh pretty big step where historically the legislature here and the governor were not the biggest proponents of medical cannabis. We've had a low THC oil program for about a decade. Um and this really changes it to be a true medical. So I think that makes us the 41st state with a medical cannabis program. And the main points are we're able to sell flour and vape uh for vaporizable purposes, no combustion. And it also expands some of the medical conditions as well, uh, so that patients can get access earlier on in their uh conditions rather than being at the end of life, which was how it previously read.

SPEAKER_02 9:00

And um so um I was thinking to myself that this is something that President Trump and Brian Kemp I quasi-agree on, which is not uh common uh among those two. Uh, but but give us um, let's talk about sort of on the ground level. What does it mean for patients in Georgia? And then I guess what does it also mean for fine federal? Because it seems to open up a lot of product categories, but also make it easier for patients. Like, do you think there'll be a huge ramp up? And are you prepared for that? And what does that look like for you as one of the six uh licensees?

SPEAKER_01 9:30

Yes, we definitely anticipate a big ramp up. I mean, at the highest level, there's only 36,000 patients in the Georgia program right now, which is about 0.02% of our 11 million people in the state. Most medical cannabis programs have closer to 2% plus penetration. So that would get us up to about 250,000 patients if you were to assume we got to where most other programs are. Um and I think the elephant in the room, as everyone here knows, is we've been at dispensary that doesn't have vapor flour for the past three years, um, which obviously makes up, I don't know, 80% or so of sales at any normal store. And then there's, you know, the traditional market, there's the hemp stores. So I think people in Georgia clearly have been going elsewhere to get cannabis. And the hope is that this drives them into uh the safe test regulated channels. And also with the conditions, it's actually relatively easy to get a card in terms of we have telemedicine. Um, the process has gotten much easier. But the law read before that you had to have an end stage or severe of most of the conditions. So it really prevented a lot of doctors from feeling uncomfortable recommending a card where let's say you had cancer, you had to be at your end of your life, frankly, to qualify, which is inhumane and really just made the doctors confused of when to give it to someone. Now a doctor can recommend you a card as soon as they think cannabis would help you if you have any other conditions. Um, so not adding a condition per se, but just growing who could actually access it.

SPEAKER_02 11:20

Um if I may, Judson, I've asked you this before, but give us a thumbnail of

Patient Access And Demand Ramp

SPEAKER_02 11:25

what how what the hemp derived THC market is like in Georgia, because it's really unlike most of the markets we talk about, in that it's there is one and it's regulated plus that.

SPEAKER_01 11:36

Yeah. Yeah, well, I mean, obviously a hot button topic in general of the hemp and regulated cannabis, but we have hemp regulations in Georgia for the past two years. I'm a bit biased as a Georgian, but I think we're ahead of the curve versus some of the southern states that just left it totally unregulated. And that's part of the problem with the pending ban. So in Georgia, you can get a hemp permit if you're a convenience store, grocery store, or even us as a medical cannabis operator, we have one as well. So we sell hemp beverages. We're able to sell, you know, large national brands like a kiva or wild gummy, all within our medical cannabis store, where obviously anyone over 21 can purchase those products. So I'm not, you know, an anti-hemp person by any means, but I think the issue has been there's also all the smoke shops, all the gas stations selling THC, PD, Q, whatever uh uh uh flavor they want to want to make up. So um that's that's been part of the issue, it's been more the enforcement.

SPEAKER_02 12:55

Um we're gonna get high-speed internet to Georgia at some point, too. I'm just kidding. Usually it's Germany with the technical uh internet problems. Justin, we're having trouble. You're you're you're cutting in and out, but I think we got the gist that there is a hemp regulatory uh there are hemp regulations there. Um you have the ability to sell it within your dispensary as well. Uh and there's also let's call it gas station version of all of that as well, which um is not ideal. Anything else for uh that we know about Georgia aside for the fact that's where I went to school? Anna, Anna Ray, Ben, Jeremy, Mark?

AnnaRae Grabstein 13:36

People love THC everywhere. And I think the hemp market uh proved the consumer in Georgia. And so this is good news for Judson and the other um medical operators that that these new form factors are going to be allowed. And and I think that it means that there's gonna be more quality product available. So this is this is a bright, this is a win. It is a win.

Ben Larson 13:59

Yeah,

Hemp THC Rules And Gray Market

Ben Larson 14:00

even if also also interesting to just hear about this kind of not just a bifurcated market of hemp and cannabis, but the kind of the intermingling of it, um, selling it in dispensaries. I think that's really interesting and unique and probably reserved for states that are kind of in that fledgling regulated cannabis state. Um, and that there's more of an opportunity there than say in the the the more kind of legacy markets, um obviously from what we've witnessed uh so far.

SPEAKER_03 14:29

Yeah. I I so I understand. So you can sell hemp flour in a dispensary, but you can't sell non-hemp flour in a dispensary. That's to you, is that is that a is that right? Is my understanding?

SPEAKER_01 14:48

No, that is not right. Oh, okay. You understood every you understood everything right, other than you inferred that there was flour. So part of the hemp regulations two years ago banned THCA flour. Again, I'm biased, but I think we did a pretty good job in what some of the federal regulations are working towards we got rid of the THCA flour, we got rid of um most of the inhalable products, and they did their best to get rid of the aesthetics, but then I'm not sure where I got cut off before. But of course, people went and made the THCPs in all of the world. So there are some of these bad products floating around out there. Um, we just sell the beverages and more of like your trusted, your wilds, your caminos, the big um brands in the hemp form.

SPEAKER_05 15:39

Nice. Thank you for that. Can I ask you a question while you're uh running smoothly? I hope I hope this works. Um you know that this is this is a big win for the cannabis industry in Georgia. Um it's mostly a red state, you know, outside of of the 2020 election.

SPEAKER_02 15:56

Um can you talk about I think you mean stolen election, Jeremy?

SPEAKER_05 16:01

When they didn't find the ballots, um not touching that one on Twitter. Um uh can you talk a little bit about how you the industry swims in the right direction when you're when you're trying to advocate for these changes, right? Because you have the hemp side, the medical side, you have advocates, and everyone seems to want different outcomes. How do you channel it in the right direction uh to get a win like this?

SPEAKER_01 16:27

It's a great question, and uh a tricky

Aligning Stakeholders To Pass Reform

SPEAKER_01 16:30

one, I guess, for me to answer. I mean, be being in the industry for a long time, I have friends on all sides of it, and I'm an advocate, obviously, myself, but definitely there's a hemp prerogative, there's the medical cannabis prerogative, and then I'd say the advocates generally just want access to the plant um to a large degree. So we worked really closely with the other licensees to answer your question. I think being aligned as an industry as much as possible is the clear answer. Um so coming from me being in California where there's thousands of operators and it's a bit more sporadic, um we worked hand in hand with our three other friends being the other licensees the past few years um to really get a clear ask, um, which was to create a medical program, you know, similar to Florida, where we have vertical integration. Um, I was actually talking to Anna Ray right before we hopped on, but unique to Georgia, we can wholesale to each other. It has not happened yet because obvious reasons the program's been pretty small, but um yeah, it's really been working in coordination, I'd say, with the other licensees. And then obviously we have a strong lobbying effort. Um, I've done a lot of work down at the Capitol as well. And I mean, it's been uh all hands on deck to get the legislature to come around, but it did pass with an overwhelming majority in both the House and the Senate, which are both Republican bodies. So to your point, I mean the Republican Party does control Georgia, and they were far and away supportive of the issue. So I think they really did come around to their credit, and it's no longer a partisan issue. That's movement. That's great.

SPEAKER_05 18:16

Yeah, that's good to hear.

SPEAKER_01 18:17

Also, I guess to your point on the the elections and all, not to get too controversial, but it is election year here in Georgia, and we do have primaries next week. So it'll be pretty big where um Governor Kemp will be leaving office, uh, which is part of why we were excited to get the signature, because I guess there's two schools of thought, either he could, you know, sign and be headed out, anyways, or he could be headed out and decide not to sign it for whatever reason because he was historically not the most pro-cannabis governor. Right. He's been a great governor, in my opinion, but uh not the biggest fan of our industry historically. Um he did sign, and then I guess who the new governor is, lieutenant governor, all of those are uh up for elections in the primary next week. And we definitely have been working with a handful of them to pass SB 220, as a lot of them are state senators and lieutenant governors and things of that nature. So a few people I hope get elected so that we can continue to keep things moving here in Georgia.

SPEAKER_02 19:22

Amazing. Um, I want to be uh uh careful

Winners And Losers Roundtable

SPEAKER_02 19:26

about everybody's time, and we have a new graphic that I want to introduce for our last segment of the show. Is everybody ready for this? I want I just want everybody to be prepared for this graphic. Are you ready? It's for winners and losers. Here we go. So also prepare your winners and losers because that's the last segment. Here we go. That's our new stinger for the last segment of the show. A thumbs up, thumbs up. Is that a winner or a loser? I guess that's the first time. Winner? Okay.

SPEAKER_01 19:54

It's a winner.

SPEAKER_02 19:56

You can't be on the fence about this. And because you're on the fence, you are first for winners and losers. Who are your winners and losers? Winner or loser this week?

AnnaRae Grabstein 20:03

I've I've got a winner for us. Um, the winners are homegrowers in California. This weekend is clone topia, and it is being marketed as the largest legal clone drop ever in history. And it's happening in Northern California at a couple dispensaries. It's hosted by David Downs, a cannabis journalist, and um, it's a whole bunch of different breeders who are coming together and they're selling clones to um individuals like all of us. And some of them are even a thousand dollars. Usually a clone is something like 15 bucks at a dispensary, and there's not a lot of sales that go on to these things, but clonetopia is bringing together the biggest, baddest breeders, and um, they're dropping all kinds of crazy genetics. Um, so I think the winners are home growers that are gonna go to clone topia and grow something awesome in their backyard this year.

SPEAKER_02 21:01

Anna Ray, what is what's gonna end up in your backyard? Is it gonna be a thousand dollar clone?

AnnaRae Grabstein 21:06

I usually grow two plants in my backyard, um, not six, which was what I'm allowed to grow because then I end up with too much weed, you guys.

SPEAKER_02 21:14

Um send it down to Georgia.

AnnaRae Grabstein 21:18

Uh, but I I don't know yet. Uh maybe I'll have to cruise through clone topia, but I will not be buying a thousand dollars uh clone. I'm not that fancy.

SPEAKER_02 21:27

Yeah, fair enough. Um, Judson, you're up next for winners or losers.

SPEAKER_01 21:34

Pretty biased here, but I'd say Georgia is the winner. I got my uh brain set on. So Atlanta Braves, best record in baseball. Um, we got the governor to sign our medical cannabis bill, making us the 41st state with a true medical cannabis program. And to the rescheduling, we're a medical only state. So pretty big windfall for us as a licensed medical operator in Georgia the past month.

SPEAKER_02 22:00

Not a self-serving winners and losers at all, right there, Judge. So don't worry about that. Mark, you're up. Just kidding. I'm just kidding.

SPEAKER_03 22:05

No, no. I um I I want to say it's both a winner and a loser, which is Apollo for buying the company that owns and puts on um MGVizcom. Uh I think it's it's sort of a too early to tell as to whether um, you know, what it'll mean for the industry, you know, and what are they gonna put more resources? Are they gonna shift it, change it, kill it? I mean, it's it's an unknown, but um, you know, I I mean I would call that a winner. I think it I think it's a win for the industry, uh, you know, that it's it will probably bring a change. And it does seem like everybody wants it to continue, but it needs to sort of evolve.

SPEAKER_02 22:47

If you if you do control F on anything that was related to this deal, you will not find the word cannabis, marijuana, or really mjbiz and any of it, just so you know. Um it's gonna be a footnote of the overall company. So we shall see. I will note this is that Emily Lewis, who is the head of MJ Biz for the previous for um whatever's Emerald, left the week before this announcement. Take that as you will or won't, but that um that is the sequence of things that did happen related to that. So that's your winner, maybe, andor loser, depending on where you call that that equation. Ben, you're up.

Ben Larson 23:22

Oh uh, I was gonna do a winner, but now I feel like I've done a loser. Can I do two? I'm gonna okay. I'm gonna do a loser, uh just so I could be what negative Nelly. Um, I'm gonna put the state of California as the loser, uh, because out of all the movement that has been happening over the last couple weeks, you know, rescheduling, earnings, it just per persistently shows like how challenging it is to operate in California and that it's not getting better, it's actually getting worse. Margins are getting tighter, EBAs are going negative, and yep, your hemp band didn't work. So thank you, state of California. On the positive side, we have a winner in Congressman Andy Barr out of Kentucky. He got the bid from from President Trump. He's taking the mantle on the hemp conversation, and instead of just pushing through a bill that makes people happy, he's actually bringing in stakeholders, listening to them, and trying to develop a bill that is actually passable. And so that is what the hemp industry needs. So thank you, Congressman Barr, for putting forth the effort and and hearing all the disparate voices.

SPEAKER_02 24:29

There you go. Jeremy, you're up. Winner or loser?

SPEAKER_05 24:31

Uh, I I got both. My winners are more fun. Um, one uh preempted you preempted me on this, Jay, but Mitch Marner, that was the best goal I've ever seen uh in my entire life watching hockey. It's incredible. I hate that it wasn't an elite jersey, but it is what it is. Uh, another winner is now that the rafters are out of the Knicks, they look like a buzzsaw. I'm catching Knicks fever here in New York. Uh, I want them to win. Um, a loser, and uh I kind of it pains me to say this because they are kind of my entrepreneurial and journalistic heroes, but um, Axios, I think, had a very weak piece from the two founders. Um, lumping in cannabis is a sin with uh AI-generated pornography and sports vetting on your phone. I won't preempt my column. I encourage all the viewers to go read the piece. Um, but I thought it really echoed uh, you know, a 1980s Reagan-era just say no viewpoint on this stuff, and it really flattened the distinction between the positives of cannabis and the negatives of everything else they talk about. So read the piece. Um, that's my loser for the week with apologies to them. I love Axios, I love them, but uh they missed the mark on that one.

SPEAKER_02 25:40

Caveats duly noted, Jeremy. I have uh I wanted to have a loser. I'll give my loser. My loser is the state of Pennsylvania, which still is like the most moderate state without any conversation about sort of cannabis reform or actually lots of conversation, but nothing actually happening. But my winners of the week are two that generally don't get on the same conversation. But Ilhan Omar, Congresswoman Ilhan Omar, and um and John Fetterman both said positive things about cannabis this week. Ilhan Omar in particular said that she thinks, I forget, let me just get the quote. Um she thinks a lot of people in Congress smoke, I'm gonna say weed. I think she might have said cannabis or marijuana, but um, I like the idea of congressmen and congressmen and women getting together after a tough day of voting and legislating to uh smoke in her her condo somewhere in DC. I'm just kidding. That's not what she said, but she did say a lot of people smoke. So I I do like that about our Congress getting more uh more chill and better to hang out with. Um and I'm gonna end it there. But John Fetterman also said uh it's not a problem with smoking pod. Maybe people would, I think he actually did use the word chill. Um uh so I do

Closing Notes And Long Weekend

SPEAKER_02 26:44

like that. Um, I want to thank you, Anna, Ray, Ben, Mark, Jeremy, and certainly Judson for being our special guest this week. We're gonna have a special guest next week, too. So stay tuned for that. The people on this call don't even know that, but there's gonna be a special guest. Um, everybody have a great weekend. It's actually another winter, it's a long weekend here uh in Canada, or most of Canada. It's called Victoria Day, also called May 2-4. That I do you guys know why? Jeremy might know why. May 2-4 because there's 24 beers in a case. Yeah, but the unofficial kickoff to summer. So um, we call it May 2-4. May 2-4. Uh, everybody knows what you're talking about here. Um, so uh everybody, thank you so much for being here. Enjoy the long weekend if you're watching in Canada. Uh, have a good Monday if you're not. Um, and everybody have a good weekend. Uh we'll see everybody soon. Thanks, everybody.

SPEAKER_01 27:30

Good to see y'all.

unknown 27:31

Bye.