Welcome And Opening Banter

SPEAKER_01 0:10

I see you, Anna Ray. This is this week in Cannabis Live. I am Jay Rosendahl. That is Anna Ray Grabstein. Jeremy Burke is here as well, and so is Mark Hauser Sukkot Sameach. Sukkot starts tonight. You can look it up. It's a great holiday and super fun. And I understand if you want to do Sukkot properly, you have to be in Sebastopol, California. Is that right, Mark? Petaluma, California. Oh, Petaluma, sorry. Yeah, yeah, yeah. But yes. Yes.

SPEAKER_00 0:41

It's the place to be, as to quote Seinfeld.

SPEAKER_01 0:44

That's what everybody's talking about. Everybody on this call. That's what everybody here is talking about. We don't need to talk about it more. That's all they were talking about. Did you see the president squint when the plane flew overhead? Did you see this?

SPEAKER_03 1:04

No.

SPEAKER_01 1:05

You guys need to spend way more time on left-wing X, if you will, just digesting and examining the president's sort of every move. But he did squint when the plane threw over and then analyzing what that actually means about his hearing, about his cognitive ability, all those things. But we're not talking about that today.

Teen Cannabis Use Hits Record Low

SPEAKER_01 1:24

But I do want to talk about something that was in a number of our newsletters this week, made sort of big, big news as well, unrelated to cannabis, but um teen cannabis use. Jeremy, I want to talk to you about it first because Kevin Sabbott hates you. Um, and this must get right in his craw that teen use goes down the more legalization happens. This is something we've been talking about a lot. What what do the numbers say and what should we take make of it?

SPEAKER_03 1:49

Yeah, Jay, I don't know if he hates me personally more than the information that I share is accurate and he hates that. So so you know, we'll we'll make that distinction here. Um but uh yeah, so for the CDC's youth behavior, youth risk behavior survey, um, team use is down to its lowest level since they started recording in 1991. And you know, all the caveats apply. This is generally self-reported data. Um, you know, there are some uh, you know, maybe accuracy issues with it, but you can see a clear trend line, right? And so I'll pull up the numbers here. Um just 12.9% of high schoolers reported using cannabis in the past month in 2025. Um that's down from 21.7% in 2015 and 26.7% in the 1999 peak. And obviously, before 1999, there was no states that had legalized cannabis, and teen use is at all-time high. Um, and what really I think Kevin Sabet does not like is that after nearly half of US states have legalized teen use is down uh significantly since that peak. And so, look, like I don't know if you can say that there is um causation here, right? Like we have to be very careful about that, but there's a clear correlation that you know age gating cannabis does prevent teen use to some extent. Uh, you know, and again, there are probably more sociological factors like teens are um, I don't know, I'm not around teens very much anymore, but you all have experience with teens. They're at they're at home on their phones and they're not out at at house parties, like uh, you know, maybe we were doing, and so there's less opportunity to consume cannabis. But overall, it's a good thing, right? And it really uh goes against some of the reasoning that anti-cannabis groups have for opposing rescheduling, uh for wanting to roll back sales in Massachusetts. So uh it's a strong data point that I think the industry uh should should should show and be kind of proud of.

SPEAKER_01 3:40

Anna Ray, should kids be having more fun?

AnnaRae Grabstein 3:43

Kids should definitely be having more fun. The numbers say that kids are having um sex later in life, they're also drinking less alcohol, they have less friends, they're spending more time on their phones and in social media. So I think the rise of social media is another interesting um whether or not it's causation or correlation, sort of was happening at the same time as legalization, uh, and has certainly contributed to just less social engagement. But I I do think if this is definitely proof point that age gating um works, which is great. Uh funny side note uh to hear that 1999 was peak teen cannabis use, because that was also peak of my high school experience. So maybe it was really just me and my friends, and uh we all turned out okay.

SPEAKER_01 4:33

Uh but but once you became not a teenager, cannabis use among teens did go down. So there's there is that.

AnnaRae Grabstein 4:39

Um I often explain to my son that um that cannabis is for adults and uh how important it is that he understands that. And I do think it's important for all parents in a in a legal regime for adult use cannabis like we have now to explain that just in a similar way that we explain that the beer or the wine is also not for kids.

SPEAKER_01 5:00

And kids don't drink, that's for sure. Um just kidding. Um but but it is interesting because here in Canada, um some teenagers can actually buy cannabis legally uh because of the upper end, 18 and Quebec and 19 the rest of the country. Uh guy hasn't fallen here, um, understanding like the residency. Mark, um is this uh part of a larger like drinking less, smoking cannabis less, working out more, on their phones more, like are these title trends that you agree into, or is it like we're gonna have a that drives fewer sales among teens?

SPEAKER_00 5:38

You mean uh are teens nerds these days? I mean, yeah, but no, that's I'm sorry. Nerds can smoke weed nerds. That's true. No, I look, I I I I would imagine that it's there is it's part, you know, it would make sense that there is um a broader societal trend that's lit lending to this, but you know, I mean there is a simple logic that you, you know, the the the presence of a regulated market inherently reduces the size of of the unlicensed market. And so if there's less access to you know to to the ability to buy you know weed behind a circle K, then and instead you put it behind a a door where you have to show an ID. Um and you make fake IDs a lot harder to fake these days. Um, it kind of makes, you know, it's a simple logic, and it's it's sort of this is the whole point, you know, of why we are, you know, why we want a you know regulated, the regulation is good. I mean, modern, you know, the regulation can go too far, but the whole point here is that we're we're working towards a regulated, responsible market where you know people can buy cannabis safely and know what they're getting and have choice and all of that. And you know, and so part of that is also that you know, as an industry, but also as parents, we don't want our kids using drugs. Um, you know, and and for better and for worse, cannabis is a is it's a drug, and so you know, so I I think that I I think I think this shows that it's working. That the whole point of this is is successful.

SPEAKER_01 7:26

I I also um for the circle co circle K people that are now mad at this show, you can direct your angst at um Mark Hauser at Cannabis Musings. I have nothing against Circle K. I don't think you can buy drugs behind there, but talk to Mark. Uh, not to us. Don't direct it at Jeremy and I direct it directly at Mark. Um

Florida Licenses And Falling Valuations

SPEAKER_01 7:44

one thing I did want to bring up because um an expanding, very large market with some big licenses is Florida. And I put it here as Flow Rida because I think that's funnier. There were 22 new licenses issued in Flow Rida this week. And uh Mark, I'm gonna go to you first because one thing you shared sort of as we prep for the show is that the licenses are not worth as much as they used to be, um, but certainly valuable in a market that doesn't have a lot of licensees and is a big market. And I don't know, at some point we'll be on the cusp of an adult use market, hopefully. What are your thoughts about what's happening in Florida? Oh, yeah.

SPEAKER_00 8:19

There um there was a study that was done um sort of I didn't do anecdotally, but they put it all together by, I think it was New York 420 week or something put together, just they pulled together all the public data, and it's a little squishy because it's hard to sort of extract the the asset value of the of the license itself. But yeah, I mean, a couple of years ago, these licenses were trading for 40, 50 million dollars, and then you know, it was about uh a year and a half to years ago. Uh the the the Planet 13 ones traded for 9 million, uh the Air One traded then um at, you know, I mean there was distressed sale, but traded for even less. And now, I mean, I'm seeing, you know, indications of three to four million out there. Um now, you know, I mean, it's still a decent amount of money, and it's still, you know, there's a lot of sort of uh cost that goes along with owning that license. You have to, you, you, because they are mandatory vertical integration, you have to have, you know, and you have to have cultivation in place, not like working, but at least like set up. You have to have your lease, you have to have a plan, you have to have cash in the bank. You know, so there's a lot of cost involved, but it it really just it's kind of remarkable how much the value of that license has declined. I mean, it's it's um, but you know, like everything else in this industry, asset values have just plummeted. Go ahead, Enray.

AnnaRae Grabstein 9:49

Yeah, so I do want to clarify because you're right, there aren't a lot of licenses in the market, but those licenses are able to scale infinitismally as it relates to how many number of stores. And so there are currently already 778 dispensaries in the state of Florida. And I I ran some numbers on those. And and uh of the existing 27 licensees, the the biggest four licensees, which are TrueLeave um Verano operating as Move, Cure Relief, and Air, um, they own about 60% of the market already. And and then there's a bunch that are in the kind of the messy middle that has somewhere between like 15 and 40 stores. Um, but the reality is that because of the forced vertical integration, so for people that are listening, what that means is that the stores have to grow and manufacture 100% of what they sell, and there's no transactions between the licensees at all. So, in order to be able to support the cost of building a brand new cultivation and manufacturing infrastructure, the question becomes how many stores at a minimum do you need to support that? And depending on how much revenue you're doing at every store, I would posit that it's somewhere around 10 that that you really need in order to be able to make it worth it to spend the money to build the infrastructure upstream. So not only do you need to spend at least $10 million building infrastructure for a supply chain, um, if not three times that, um, plus you need to spend all the money to open those 10 stores. And so of these 22 new licensees that have been waiting three and a half years in this process, a lot has changed. And my guess is that not many of them have the capital that they'll need to be able to commercialize these licenses. And uh I think that that means it's even less likely that the licenses have value in the open market because who really wants to compete with this massive concentration at the top? And and so of these 22 licenses, I've I made a prediction earlier on um Tuesday's high spirits, but I think that five of them will actually commercialize and um the rest will will go quiet, won't be able to make the bond, won't be able to raise the money, and um maybe we'll become valueless, maybe won't won't have any transactional value um as paper. I don't know. Yeah.

SPEAKER_00 12:34

And Arabian, you make some great points there. I mean, that that, you know, I mean, I you're right. I mean, why would you it's it's unless you've got a real special sauce and that's hard to find in this industry, um, you know, how are you gonna compete? Um it's it's a really interesting dynamic. I imagine that most of these people uh, you know, applied at the time when uh adult use was still sort of you know on the horizon in Florida. So it made sense back then. I think the the only sort of um uh potential uh I uh uh what's twist in all of that is that if you know if if medical uh survives the litigation and um and we have the you know and the DEA buy-sell drug dealing scheme stays in place, and then and um and then somebody finally challenges in court interstate commerce and wins, then you know, then Florida's ver, you know, Florida's, then you can start bringing in cannabis on a wholesale basis from other states. That really then I think that would possibly change that dynamic. Maybe not enough to tip the scales to make it valuable, because then you know all the big ones are gonna do the same thing. Um but nonetheless.

AnnaRae Grabstein 14:02

I think you're right on. And I was having the same thought of if you could avoid building the the supply chain infrastructure in Florida and just open the stores, then then there is then there is something there that is arguably interesting. Um and and even without interstate commerce, if Florida changed their laws and allowed wholesale transactions between existing licensees, um, that could be another reason because it would mean that there wasn't the impetus to build all of that cultivation infrastructure. And um, so far I think that it's benefited the licensees that exist to hold on to this forced vertical integration. But maybe they might start to say, well, we would love to be doing some wholesale over here, over there. Um and and potentially with the DEA uh and the rescheduling medical kind of the interstate commerce um question, it also could force function um commerce between the licensees in Florida for the same reason in a simpler way, without having to travel over the state, but to be able to transact between schedule three registrants.

SPEAKER_01 15:15

If Kim Rivers wanted to do wholesale trading among other Florida operators, I have a feeling she could get it done. Um just the way Florida has operated, how the regulations have been written and the influence she slash they have. Um my sense is it's working just fine for them and the other big operators you mentioned in Florida. Status quo is good. These new licensees, I'm not sure they make a dent, as you said. And I think um if things stay the same, they're gonna be a-okay. Um that's my sense. Um, anything to add there or you want to shift gears to money problems in New York?

SPEAKER_03 15:52

No, nothing to add. I just I just think the market, like I, you know, the the overall macro point here is that the market's just a lot less valuable to uh excuse me, small license holders without the promise of of recreational adult use sales. Um I think it's just permeating downstream in everything, all the deals, all the asset prices. Um you know, there is that catalyst that may never come. And I think that's that's what we're seeing.

SPEAKER_01 16:20

And even if it does, good segue. Even if it does, it doesn't mean things go gangbusters. Let's

New York COD List And Unpaid Bills

SPEAKER_01 16:26

shift gears. Jeremy, I want to start with you about the COD list in New York. And the COD list, you're gonna tell me if I get this wrong, is if retailers don't pay their bills to brands and suppliers and vendors, they get put on a list, uh, mandated list in New York. The list became public. We now know what it is. It seems kind of small, but it's maybe just a canary in a coal mine in New York. What's the latest?

SPEAKER_03 16:51

Yeah, so so uh New York retailers, New York cannabis retailers owe about $3.9 million to growers and brands uh that they are using to stock their shelves from. Um this list was this this list was leaked, I guess you could say leaked in uh in mid-August, so the numbers may have shifted a little bit since then. Um but it it's it's a huge and and potentially elemental problem for New York's cannabis industry. While the overall sum is not that large. I mean, you know, to some big businesses, 3.9 million is just like a little line item. But um, you know, to small cannabis brands, to small growers, uh, you know, that could be the difference between you know being in the black or being in the red, right? And so um, you know, these issues can permeate throughout the entire industry. Uh and you know, we'll we'll be talking about that a lot, but but you know, when the growers aren't getting paid, they're not gonna do business with the retailers, you know, they may lose money that they need to reinvest to grow their next crop, et cetera, et cetera, et cetera. And so uh it's a huge problem that this money is owed. And and you know, thankfully the state is keeping track of it, but there's not much they can do to force, you know, to force the issue without litigation coming up. And so, you know, I hope I hope that the industry doesn't get tied up in that, but at the same time, like, you know, pay your growers and pay your brands because uh it could be problematic for everyone. And so that's um, you know, that's the way I'm looking at it. Uh and look, like, you know, I think the September list, the list is sort of updated monthly. Like, we could see that number increase. Um, and the more it increases, you know, the higher the risk gets for, you know, not a market failure, but but it's yeah, it's a canary in a coal mine, as you said, Jay.

SPEAKER_01 18:28

Anna Ray, you've seen this before.

AnnaRae Grabstein 18:32

I I I have. You know, my my home market here in California is notorious for having accounts receivable problems. And and when I saw the the balance on the September list for New York, I I kind of chuckled, like, oh, that's cute. Because because I think that the accounts receivable that's past due in California is probably probably closer to a billion dollars than than to the four million in in New York. And it isn't public information of what that is, but but I know of many brands that have over a million dollars in AR due to them from retailers that is past due, hopefully not uncollectible. But but the issue here is is really that is that retailers get very behind on paying their bills. It has really bad domino effects all the way up the supply chain. And in a highly regulated environment, and we've seen this in the way that the three-tier system in alcohol was created, it's just really important when you don't have a regular open market environment that everybody does what they are supposed to do. And one of those things is pay bills. And um I I think that this is positive that New York has put the COD system in the law. I think that it's a huge oversight that so many states do not have any type of accounts receivable accountability um baked into the rules. And it's really kind of about how they get through it and what enforcement happens. And also just overall, all these businesses growing up and starting to create healthy environments to be able to function and just do the basic stuff like pay your bills on time.

SPEAKER_01 20:21

Yeah. And Mark, I want to go to you because it's made more complicated by the way some of these licenses were um delivered and the way the businesses have to operate on those licenses. And we brought up in our internal chat um uh a dispensary that is at auction, uh, I guess out of bankruptcy or the equivalent of bankruptcy, and it's a challenge in New York because of the type of license, the value license, which goes back really to the Florida conversation as well. Like, what is your take about what is happening in New York? And um, has New York complicated it so much with their licensing and the COD that it's a very difficult place to do business, especially if you're small?

SPEAKER_00 20:58

No, I think this is no different than anywhere else. Um, I mean, unfortunately. And I I say that slightly flippantly, but I think it's true. I mean, you know, kind of Ray said it. I mean, this is this is the same problem everywhere. And it's a problem of the fact that it, you know, it it's hard to run this a business in this industry on an sorry for the background noise, on a net profit basis. It's not easy. You can do it and people do it, but you know, uh I you know, I would venture to say the vast majority of of cannabis businesses lose money because because you know, because margins are not great, and then operating costs are just so darn high. And so then, you know, and there's such a lack of debt financing. You know, there's there's very few lines lines of credit to manage payables. There's very few, you know, the the the the uh receivables financing and a lot all all the financing that's out there is extraordinarily expensive. Um, you know, I mean the the case that I'm I'm you know that I you were referring to is this is a the Daily Green uh just outside of Times Square, uh is it's being uh a majority interest in the

Hard Money Lending And UCC Auction

SPEAKER_00 22:11

in the parents is being auctioned off in a what's called a UCC sale, you know, which is an outside of bankruptcy context. And uh Sam Risman at Law 360 Cannabis posted uh a complaint today that's being filed by the holder of that interest, uh, the plaintiff. And because the lender that's that's forcing this sale, apparently one of the terms in the loan is that um is that is that in a case of a default, there's liquidated damages, which is a forced mandatory payment of $2 million a year per year throughout the term, which is bonkers. Usually you see, like, all right, well, we get the interest that we would have received, but $2 million a year, like that kind of term is the kind of stuff that is demanded in this industry. And there is, you know, there's an understanding that there's this sort of risk-adjusted return, you know, for lenders, because there's a lot of risk in these businesses, but but um, you know, but they you know there's a lot of taking advantage too. And you know, and so it's there's a tough line to cross there. And I think it's this endemic. It's just, you know, the the short answer of it is that is that operators have used their c you know the their suppliers and taxing authorities as lenders in this industry because there just is no other option. And it's this sort of mutually assured destruction of you know that we've all sort of built up. It's the or it's like the you know, the meme of the of the Spider-Mans uh pointing to each other. So, you know, it's just like we're all in this vicious cycle. How many other metaphors can I come up with? It's a lot in one sentence, it's pretty good.

SPEAKER_01 23:55

And you've it and it and it um repeats itself or it rhymes with what's happened in other markets, as Anna Ray was saying, right? Like it it just repeats itself and and hence the risk, um, and hence why nobody wants to lend as well, because they've seen it, they've seen it all before. Yeah.

Winners And Losers Roundup

SPEAKER_01 24:12

Yeah. All right, it's time in the show for everybody's favorite segment. Hold on, I gotta find the thing. We ready? Here we go. Winners and losers. Uh, who is Jeremy? You're gonna go first. Sure.

SPEAKER_03 24:30

Uh I got a loser this week. Uh, and we talked about it a little bit earlier, but it is smart approaches to marijuana and Kevin Sibette, uh, you know, for misinforming the public about the data around teen use when it comes to critical ballot measures that could take away people's jobs and livelihoods and take away the wills of voters. Um, you know, I I I think it's fair to say, it's fair to call it misinformation based on the recent CDC statistics. And, you know, I'm not gonna stop them from doing it, but they will continue to do it. And so, you know, everything, all of their advocacy work should be categorized as such is that they are willing to get down in the muck and uh lie about things.

SPEAKER_01 25:16

Well put, Jeremy. Making how to make friends and influence people. Um, Mark, winners, losers?

SPEAKER_00 25:22

I my winner is Anna Ray and Ben for their high spirits this week, particularly on uh OES, but particularly this week for with Jason Adelstone from Harris Solowski. Um that was such a great interview, and and uh, you know, A because I'm a lawyer and it was with the lawyer, but you know, but he uh, you know, he he he raised a number of points about the reality of what um the realities of of policy and politics and also you know what of what rescheduling is and isn't gonna do. Um and uh, you know, I it also remind it also helped me realize that I'm not totally nuts in what you know what I've been yelling at in my musings, but it was it was such a great interview, and you know, everybody should be re listening to that or reading the transcript or whatever because it was just phenomenal.

SPEAKER_01 26:15

Here, here.

AnnaRae Grabstein 26:16

And already just got a shout-out. Thanks, Mark. I love that. Um, you know, so then I'll take it to my winner. And um, my winner is sort of inspired by that interview with Jason Addlestone as well, in some ways, because he really had me thinking all week about how politics is the precursor to policy. And then my winner for the week is um President Vladimir Zelensky from uh Ukraine, because uh I just listened to an interview that he did with the editor-in-chief of the Wall Street Journal, Emma Tucker. And he had just had a meeting with President Trump. He's in New York for the UN, and um it was masterful politics. It really was showing all of us how to both have a moral position, an authentic, true kind of commitment to your cause, but then also speak directly to Donald Trump. And so much about what we are working on right now in cannabis policy directly lands at Donald Trump's desk. And that was another thing that Jason Adelstone reminded me of was just how much can be done with executive action. And while we're doing a lot of fighting to get things through Congress, there is another path, which is executive action. And whether it's with Donald Trump or with the next administration, whoever comes next, thinking about how we speak directly to the president and get them on board with our ideas and our concepts of like the approach that we want to take, is that is what true, like brilliant politics is. So everybody should listen to this interview with uh Vladimir Zelensky, published by the Wall Street Journal. It's easy to find. Um, and think about the lessons that we can take from that in terms of the way that we're talking about um policy and the things that we're asking for from our government.

SPEAKER_01 28:13

It's almost like the free world is looking for new leadership, unbelievably, which is the second time that's come up in two weeks. Uh, first around, Mark Carney. Um my winner of the week, if you thought it was unpopular to uh give the winners of the week to lawyers, wait to hear what I have to say.

Metrc Rollout And Cleaner Data

SPEAKER_01 28:30

Uh, we had a webinar this week um talking about metric, and the folks from Metric actually joined us. My winner of the week is metric, even though the clip I'm gonna show you is not from metric. But one of the outcomes of the rollout in New York, which is a positive, is the data is now better and cleaner. Um, here is um a clip of Rick Bashkoff from Lit Alerts talking about the benefit to his business with metric's rollout. Here we go.

SPEAKER_02 28:53

So it's hard to isolate the metric effect. But one of the things that we do at Lit Alerts is we go out and we observe retailers' websites. And so what we're able to see is just how messy the data is and if that is improving. Now, one of the things that we were looking into is maybe there would be some total brand number that would fall off as people had to get their act together. Maybe we were gonna see some of the fluff fall off. That is not the case. And I think that really has much more to do with the massive growth opportunity that everyone's seeing. And I think that most people who are looking to expand right now into a new state, they're looking at New York, New Jersey, or Ohio. And so there's just a lot of influx of new brands there. But one thing we did notice, which is super encouraging, we can see how they're spelling brands, how they're naming products. And we have seen a noticeable improvement in the quality of that data since about the March-April timeframe.

SPEAKER_01 29:47

So what he's saying, and what metric was saying too, is that the industry is cleaning itself up in New York out of a necessity for compliance. But we also talk to retailers and people doing work on the ground. It is becoming, if you use metric appropriately and roll it out not just for compliance, but also to measure your business, things do get better. Um, also acknowledging that rolling it out midway through legalization as opposed to day one is a real problem. Not metric's problem, but it was certainly New York's problem. Um, interesting stuff. You can catch the full uh webinar both on our uh LinkedIn page but also on YouTube. Um I have some stuff to

Promotions Events And Sign-Off

SPEAKER_01 30:22

promote. Anybody else have stuff to promote before we say good weekend, everybody?

SPEAKER_03 30:27

It adjacent.

AnnaRae Grabstein 30:28

We're trying to get more subscribers onto the High Spirits YouTube page. Uh, we have neglected it. We built our audience on LinkedIn. So if you're listening and you would subscribe to High Spirits, we would very much appreciate it.

SPEAKER_01 30:41

We will put a link in the show notes to that. Mark, what are you writing about?

SPEAKER_00 30:45

Uh I well, I just I wrote um last week about uh the the illegality decision, uh and that was a fun one, and had the chance to talk to the Cannabis Bar Association about it, um, which was a hoot. Uh and um yeah, I'm I'm always looking for my next topic.

SPEAKER_01 31:05

So getting well, you're gonna hear from Circle K this week, so we'll wait to hear from the hearing from that complaint. Uh, from our perspective, we have an event coming up in New York on October 22nd, our second iteration of the high rise in New York. In November, we're gonna be in St. Louis for Midwest Cannabis Forum. We're calling it pot policy and politics. December 2nd, watch your inbox. We're gonna be in Las Vegas for a breakfast. And then December 17th, more on this coming up. Uh, we will be in Buffalo. I expect all of you to be in Buffalo in mid-December because there is a there isn't. I was gonna say there's a direct flight from the Bay Area to Buffalo, but certainly that doesn't exist. Um, but we look forward to having everybody here because winter in Buffalo is certainly special. Um, all those things, and Jeremy and I are gonna have an announcement next week about something interesting we're doing within the cultivator platform. So stay tuned. That's a cliffhanger for you all. Mark, Jeremy, Anna Ray. Have a great weekend. Thank you. Thanks, everybody.