Home Audio Transcription Betting Big On Northeast Cannabis (Podcast Transcript)

Betting Big On Northeast Cannabis (Podcast Transcript)


Editors’ Note: This is the transcript version of the podcast we posted last Wednesday. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast embedded below, if you need any clarification. Enjoy!

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Rena Sherbill: We’re talking to Jay Czarkowski out of Colorado, and we talked with him last year. I mentioned on the podcast a little bit over a year, actually a little bit under a year. Talked to him last April. He is an expert, a longtime expert in the cannabis industry, has had his hands in a number of different lanes in the industry focused primarily on real estate talks today about getting into the northeast, why he’s putting all his chips into that region of the states.

Why he believes in it, get into some of the players there and some of the players he likes in general. Hint, we’ve another guest has mentioned the exact stock that he’s most excited about a mid-tier previously so might be worth looking into investors heed these calls, these repeated calls.

Today we talk about East Coast West Coast why Jay’s bullish on the east coast. A lot more analysis coming up in these next weeks as we suss out the industry in 2022 and beyond. Thanks for sticking with us. Hope you enjoy this one. So Jay, welcome back to The Cannabis Investing Podcast. Welcome back to Seeking Alpha. Great to have you.

Jay Czarkowski: Great to be back.

RS: We were just talking that we talked over a year ago which in many respects is a lifetime ago and in other respects seems like maybe not that much has changed.

JC: It’s dog years, Rena. It’s dog years, so seven years.

RS: Exactly. Exactly. Well put. So kind of to start out with, you’ve been in the game for a while you’ve been on the podcast before and I know a lot of listeners know you from different avenues within the cannabis industry. But if you want to kind of share briefly with listeners in catch them up kind of where you’re coming from and how you’re looking at the cannabis industry through which lens?

JC: Sure, so 13 years ago, I stumbled upon the wild idea of opening one of Colorado’s first medical marijuana dispensaries and subsequently built for grow operations. 12 years ago, we started Canna Advisors, the consulting company, because we were approached by a group of folks in Connecticut in 2012 that wanted a license. I went to work for them, won the license, got the facility up and running. They sold it three years ago to GTI (OTCQX:GTBIF) for $80 million.

Fast forward to 2022. My gosh, what have we done work in 36 states, I think at this point, got a full time crew of 25 folks here in Boulder, Colorado, and we just opened our New York office last week. Got the keys and our access badges to our office suite in the Empire State Building. And it feels like we’re just getting started 13 years in.

RS: Yeah, right. So speaking of New York is that fortuitous kind of placement as New York and New Jersey come online this year.

JC: It is. I mean a lot of people feel the way I do and I’ve felt this way for many years now looking at the Northeast. When I look at New York, Pennsylvania, New Jersey, just those three states alone, you have more population than all of the California. You throw in Massachusetts, Connecticut, Maryland, you easily just right there in the Northeast, you easily have more people, more cannabis consumers than the entire West Coast. And there’s literally nothing out there right now. When I say nothing, I think there’s maybe 10 business licenses issued in New York states. There’s maybe 10 businesses operational in New Jersey at this point. It’s not even in its infancy there.

So, there’s just so much upside to build a multi-multi-billion dollar industry in the Northeast and I intend to position myself and take on my share of the work and help get it built. So, we had Alan Brochstein on, who I’m sure you know, from within the industry talking about how New Jersey’s one of the major catalysts coming this year. For some of the – he spelled out some of the reasons you mentioned just now, how are you looking at it, as it comes online? First of all, like before it even comes online, how are you looking at this time? And then how are you seeing the timeline kind of play out as it rolls out to the public?

JC: Well, I’ve certainly learned over the years that we’ve done this that nothing happens quickly in this industry. At least rarely. So, the first licenses were issued in New Jersey, my gosh back in 2012. They’re just been a round of applications accepted by the state of course, for cultivation processing, and we have another round of dispensary applications. So that round opens up March 15. So, as things are moving forward, right, in New Jersey, it’s happening. But licenses need to get awarded, facilities need to be built. So from an investment standpoint, the first thing I always take a look at is who are these teams that are positioning themselves for success?

Huge aspect of this in New Jersey and New York is going to be controlling the real estate and more importantly, having local support. So, we’re looking at good groups that have those pieces in place.

RS: And are you looking to work with the kind of leading players with like the MSOs within this, like, who are you kind of looking to partner with and work with as the rollout happens?

JC: Well, that varies. I can tell you that in terms of my consulting company, Canna Advisors, which is really my main day job, call it. We do have MSOs that come to us that we help secure licenses along with some of the larger investment funds in the space come to us and ask for help securing licenses. And we also work with mom and pops typically, folks that have been in business in New Jersey, maybe they had a small business in different area, different industry. And they look for us to help them secure license.

Now, our private equity fund Trailhead, we’re of course looking – we’re earlier stage with that fund, so we’re looking for new entrants into the industry, or possibly an operator in another state that wants to get into New Jersey, but we’re looking for early stage investment opportunities in the state. So, within this limited license model, what do you feel like investors would behoove themselves to be focused on are looking at?

In New Jersey, it’s really not on the state level a limited licensed state, because the state really hasn’t effectively limited or announced a limit to the number of licenses, that’s when issue. The way those business licenses will be issued is in terms of limited real estate and limited local support. In other words, I’m just going to use this as an example Jersey City. I know Jersey City is going to allow for cannabis dispensaries and grow operations. Are they going to allow for 500 to 550? Probably not. The local municipality typically will make, put some kind of a limit on those business licenses that they want to operate within their borders.

So really, it’s going to be about securing that property and securing that local support. If you could secure those two things, you’re not guaranteed to get a state business license, but I’d say 90% chance you’re going to get it. So, we look at groups that have that. Now in New York, we don’t know for sure yet, because we haven’t even seen draft regulations of New York. Those are expected to come out in March, late March. But we do believe that New York State will limit the number of business licenses that they issue.

So, we’re going to be of course, not just jumping in investing in New York startups, until we’re confident that these groups could get a license.

RS: And kind of looking at all the different players at all the different levels that you’re talking about in terms of operations. Do you have a thought on what went down with MedMen (OTCQB:MMNFF) and Ascend Wellness (OTCQX:AAWH)? Because that was one of the players that I think investors were excited about going into New York? Do you feel like there was a surprise or a shrug of shoulders when that deal broke down?

JC: I definitely shrug my shoulders in a way thought it was kind of funny, just because I know that Ascend is backed out of deals before with other groups that they were proposing to acquire. And then, MedMen of course, backed out of that deal. MedMen, of course, has had a tough go of things based on original founders. So I guess it didn’t surprise me at all, and I really don’t even follow it.

RS: Mm hmm. And for investors looking at the space, like in terms of publicly traded companies, last time you were on you were talking about the upper hand that MSOs that multi state operators have in the industry. Do you feel like they have an upper hand as kind of the tri state area or is it even as you’re like pointing out the East Coasters are really going to be like states that are touching each other. It’s really more expansive even than just the tri state area. But as this East Coast region develops, what do you think is worth looking at for the average retail investor?

JC: So for the average retail investor, certainly, and I’ll talk about the MSOs just for a minute here. The majority of these MSOs, like, they’re still in the build out stage. They’re still building facilities. Even in the states in which they have security licenses two three years ago, they’re still building facilities. So, a lot of upside for these larger MSOs. At the same time, especially in New York State just like the Humboldt area of California, New York State Finger Lakes region, I don’t know the area that well, but it’s called upstate for lack of a better word. You also have a lot of legacy growers. So, there are opportunities for business folks to partner with these legacy growers. There’s opportunities for the legacy growers on their own to come legal, and get a license and build a brand.

So, I think there’s opportunities, both purchasing stock and let’s face it, most of these MSOs, their stock is so low right now, it’s a great time to buy. Now, there’s also opportunities to make private placements over the next couple of years two three years, in a lot of these startups in New York and New Jersey.

RS: It’s funny, like, since the year has started, we’ve really been focused on the East Coast and the West Coast, but really specifically California on the West Coast. We had like a whole episode dedicated just to California and kind of talking about all the problems there. And the things that have people excited about, a little bit down the line. But something that we were talking about with California is that there’s really no way for a small business to make it there at this point. It’s just kind of basically impossible. What would you say about that in terms of the East Coast specifically like the New York New Jersey region?

JC: I would say the following and I’ll just mention my personal views on California. I’ve been in the industry for 13 years, I’ve done business in 30 some odd states. As a general rule, we don’t do business in California, it’s just such a mess out there. It’s been the Wild West for not just a year or two. It’s been the Wild West out there for generations. And it’s going to probably take decades for that to unwind and for a stable regulated business to develop. I mean, a lot of businesses in California, even some of the bigger players, they have their legal side and they have a black market side of their businesses.

If I had a bet California versus the Northeast, I’d bet on the Northeast all day long, just in terms of the financial expertise in that area, the brand expertise, the marketing expertise, and just the fact that it’s more of a blank slate. I mean, yes, you have your pockets of legacy industry in New York, and I’m sure New Jersey and Pennsylvania and other places. But for the most part, there is an opportunity for a fresh legal industry to develop there. And if I had a bet on one geographic area of the country, I’m pushing all my chips right now into the Northeast.

RS: And for those reasons that you mentioned, because of you feel like the operators are going to be able to do a better job out there? Like, what is it specifically that lends itself to kind of not just the bigger operators, but even a smaller operator able to make it there?

JC: Well, the first thing I mentioned is it just a wide open market there. I mean, yes, there’s certainly a black market illicit market in New York, New Jersey, in that whole area, but I don’t feel like it’s as entrenched and as large as that side of the industry out of California out of the West Coast.

I mean, let’s face it, the entire West Coast from Southern California, all the way up through British Columbia, they’ve been a major exporter of cannabis for decades. I don’t think New York is as big of a black market player. I think the opportunity for illegal regulated markets develop in New York, I think that possibility is high and I believe it’s going to happen.

RS: And what about like all the illicit cannabis coming from California into New York? Do you feel like that peters out as the legal market matures?

JC: I think it will. And one of the things that will happen as the legal market matures is brands will develop in New York that entire Northeast area, brands will develop and a loyal brand following will develop. There’s an underground social consumption lounge in New York City that I like to go to I’ve been going for years and for the most they carry products from California. I won’t go near them, because I don’t know what’s in them.

I don’t know how contaminated they are. So, I definitely believe that the brands that develop in the Northeast will also develop a brand following. Those brands stories will resonate with people in the Northeast, and there shouldn’t be much use for our products from California.

RS: And what do you feel like is going to tap into the market of, do you feel like it’s something specific that you can point to like, this is going to be a successful brand in the East Coast? Do you feel like it’s something different than we’ve been seen across the states like, how are you looking at that brand development there?

JC: So, I’m certainly not a brand or a marketing expert, but I’m looking for – I’m going to be looking for brand stories that resonate with people in the Northeast.

RS: So just based on like customer preference, once it opens up, you’re looking at who people are buying?

JC: Yes.

RS: Do you feel like there’s something that you can take from your time in Colorado that will kind of provide you some good lessons with you, when you go to the Northeast? Do you feel like there’s things that you can point to like, Okay, we learned this in Colorado, this is something I can take with me.

JC: Sure. The biggest thing that I learned over the years and comparing Colorado to other states is that, it was the Wild West here in Colorado when I opened my first dispensaries. I was one of the first dispensaries, I was probably one of the very first vertical operations in Colorado. And it was before we had licenses. It was before we had rules, before regulations. It was the Wild West in Colorado. But it was only the Wild West here for a year, maybe two. And its regulations – I think the big differentiator back then was the state of Colorado right on the track to shut this whole thing down. They said, Okay, this is happening. Let’s try to figure it out. Let’s try to figure out how to work with these unlicensed unregulated businesses and pull everybody together into a regulated market. And it happened.

The other thing we had in Colorado was we had no limits on licenses. So everybody had a shot, everybody had a chance to play. And the cream rose to the top. Now when I had my first dispensary and grows, my philosophy back then and it’s very similar to my philosophy right now is that if somebody could come along and do it better than me, provide a better product, better customer service than they deserve. They deserve to win. So, I think New Jersey is going to be like that, just because there’s no limits on licenses.

New York State, there are going to be limits. But I think it’ll be a large enough number that a lot of small businesses will have a chance to play. And what I’ve seen in states like Florida, where there’s a small number of licenses for such a large state, a product quality suffers products, or poor qualities poor prices are high. And the one the biggest thing I’ve learned over the years is competition is a good thing. And if the MSOs are afraid of it, well, they need to up their game.

RS: Do you feel like the MSOs are afraid of it? Because it seems like right now the strong MSOs are looking at the competition that has like how cheaply priced they are in terms of like buying them up?

JC: My experience overtime is that, MSOs or even single state operators, and really any operator for that matter in a limited licensed state, they’re going to spend money on political donations, they are going to spend money on lobbyists to keep that program restricted, to keep a small number of licenses. I think it’s the same reason a lot of the larger companies lobby against home growing, which I don’t understand. I mean, sure, that’s like, I like to drink beer Rena but I don’t brew my own. I go out and buy beer and I think if people want to grow cannabis at home, I think they should be able to as a hobby, whatever. But I think for the for the most part, people will want to go to retail locations to buy illegal products.

JC: Do you feel like the people that came out against home grows, do you feel like they regret it at this point? Because for the reasons you mentioned, it seems like not the hill to die on, you know?

JC: Well, a lot of it is fear, right, especially in new states. I’m not sure what the situation is Mississippi with this most recent bill, but a lot of new states especially if they’re just getting into medical, they have folks that are adamantly against home growing for a variety of reasons. We have home grow in Colorado. I mean I’ve been in the industry for 13 years. I certainly want to call myself a master grower, but I could grow a cannabis plant and I think the last time I grew my own cannabis plants was probably 2013.

RS: What do you feel like the main reason is against, like a legitimate reason against home growers?

JC: So, I don’t think there really are any legitimate reasons, I think there’s a lot of fear. One of them of course, is that it’s a market that I think law enforcement and maybe the now on marijuana legalization folks think that it’s going to be easier for kids to get it, whatever. I don’t think any kid in this country has a hard time getting marijuana if they want to get it. Then of course, I think some of the established businesses sometimes think that if I think that homegrown is going to somehow hurt their retail sales, and they lobby against it.

RS: Yeah. Yeah, it definitely feels short sighted, like, every time I hear something about I’m always like, it doesn’t, it’s good optically to be in favor of it. And I don’t see I mean, the kid’s going to have a much harder time growing weed in his house than it is buying weed. But let’s not get too far off of tangent. So okay, talking about East Coast and talking about West Coast, and then we start thinking about or at least I start to think about kind of what comes down the line. I mean, interstate commerce, is way, way, way down the line.

But how do you at least as far as I can tell, but how do you think about we talked about New York and New Jersey and that area opening up at some point this year, how do you see the next year or two, along those lines of states developing and how do you see it growing? And also kind of vis-à-vis how do you see the operators growing?

JC: So are we talking – you want to talk about states other than New York, New Jersey that are kind of going through the process right now?

RS: I think so. Yeah. Like, how do you see the general picture developing across the stage?

JC: So I think the general picture right now from what I’m starting to see is that even the reddest, the most conservative, the most anti cannabis states, not all of them, but some of them or most of them, a lot of these anti cannabis conservative states, I think, finally realize like, look, the majority of the residents, the citizens of my state, they’re in favor certainly of medical cannabis. Right. And I got to believe there’s not a single state where the majority is against adult use, like legalization.

So I think people are aware of that, say politicians, of course, are looking at all these other states that are doing it. And now it’s kind of a race to Okay, who’s going to be the last person that still has prohibition? I mean, I just read this morning when I was having my coffee that Wyoming, at least they’re discussing adult use. I mean, you have all these states in the Deep South that are moving forward with medical programs. I mean, come on Virginia. Right. I always thought Virginia was quite a conservative state. They’re an adult use state now.

Kansas is a holdout, of course, but I’m told that we’ll probably see something happen there this year, at least for Medical. I mean Montana’s pretty rad. I mean, you have all these places that have something and I don’t think anybody wants to be the last man out.

RS: Yeah, it definitely seems like I mean, we’ve been talking about the fact that cannabis is a bipartisan issue for a while, but I think it’s really, really been evidenced in terms of the legislation that’s coming out in terms of the states that are going online. How do you feel like these the legislative, as we talk about different states going online, it seems pretty clear that that’s going to be the path to legalization is just each state going online as opposed to like a top down approach? How do you see kind of these different political, some might call it like posturing or promises around different laws, different bills that are coming out? How do you look at the political kind of angle as it meets up with the cannabis industry?

JC: The political angle, I try not to actually get too involved in the politics of legalization just because I’ve been saying for years now, yeah, it should happen in the next year or two, it should happen in the next year or two. I’ve spent plenty of time in Washington DC lobbying. I’ve lobbied at the state level and local level over the years and clearly progress continues to be made. So, I do know this even if we did have some type of federal legalization today, tomorrow nothing changes. Nothing changes next week or next month.

This is still a state issue, and every state has their own program. In other words, if cannabis was miraculously legalized today, it doesn’t mean that next week, these dispensaries in Colorado could start purchasing cannabis from Humboldt County, because in Colorado, we have laws everything that’s sold here has to be grown here. Now, there are some exceptions to that the Oklahoma program, believe it or not, it does allow for export to other states. And of course, Oregon now allows for export to other state. None of that’s happening, of course, because there’s not another state that allows importing.

But I’ll throw this out there Rena, if there was a state that said, Okay, we’re going to allow for import from another state. I could see it happen. I could see it happening, despite federal prohibition. So, earlier when you said interstate commerce is still way, way out. I wonder about that. And I’m not so sure. I mean, it’s federally illegal to grow and sell cannabis. We do it. I think that interstate boundary is going to be crossed sooner rather than later. And it should be.

RS: Interesting and like a more piecemeal approach as opposed to we now have interstate commerce, it’s more like, yeah, now Oklahoma can export to state X.

JC: And just to be perfectly candid, Colorado used to be a major exporter nationally of cannabis. People would come from all over the country, they go to dispensary A, buy two ounces. Go to the dispensary next door and buy two ounces and they’d assemble pounds over the course of a few days and take those pounds back to their home state. Colorado has lost a lot of that market share to Oklahoma. Oklahoma with their thousands of cultivation facilities and dispensaries, there’s people coming from all over the country to Oklahoma now, assembling pounds and taking that weight home to their home state and selling it.

RS: Guerrilla operations. It’s a whole different thing when you think about it in terms of like, it’s interesting, like how the industry can develop working around the limitations. And it’s almost like what the people want? They want their cannabis that’s been proven over and over, in like, the darkest of days across the whole world when we thought like, everything was being shut down. Cannabis is deemed essential. And I think, now we’re starting to see like you can or we continue to see, I should say, you can’t stop something that has been I guess taken out of the bottle already.

I think you can only try and slow it. It’s interesting. So, do you feel like the state by state approach not just in terms of, I guess, adult use and medical but also in terms of what you’re saying import and export, do you think that that just pushes everything and that’s what will eventually force the kind of the federal government’s hand?

JC: You just helped me realize something in that regard. Yes. Just like, we can always point to the fact state by state that cannabis already exists in like Wyoming and Idaho and Kansas for example. There’s no shortage of cannabis in those states. It’s easy to get. And I think that helps politicians realize, hey, let’s regulate this in Texas program, where just like that issue exists. There’s already a massive multi-billion dollar interstate commerce industry for cannabis. I mean, billions of dollars of cannabis are exported from California alone every year.

So, there’s plenty of interstate commerce happening and it’s just not regulated, licensed or taxed. So maybe if the federal government decided, maybe we can do a little piece of this, maybe we could tax it somehow, maybe we can license it. And maybe they be more interested but whether they take action or not, there is a very, very well established and robust and highly profitable interstate commerce cannabis mechanism in this country.

RS: So, are you like paying attention to like is safe banking going to end? Is 280 E going to be off the books, like, how are these operators going to kind of take the next step? Are you focused on that at all? Or are you just whatever is going to happen is going to happen, I’m playing the game that’s in front of me?

JC: Yeah. You’re right. The latter, I’ve been in this for so long I’m completely over the whole banking issue. I’ve had a bank here in Colorado for nine years that takes good care of me and knows everything that I’m up to. And a lot of cannabis businesses do have banks. They work with banks. They have a good relationship. Valley Bank, I’m not sure whether base but that’s a big national bank right now that’s doing a lot of work with some of the larger MSOs and I think there’s going to be more follow. When it’ll be official, I don’t know. I don’t follow it.

RS: So as we’re talking about how you see the industry developing, how do you see like the operators developing? I’ve been kind of voicing the opinion that it’s the most salient thing to look at is management at this point, just in terms of how they can run operations successfully. And as you watch these all these M&A deals happen, how do you see the operators growing and kind of getting to the next phase of growth?

JC: Well, they’re struggling certainly in the hardest, the biggest challenge that larger cannabis business faces is the fact that, for every new state that they acquire assets in, it’s a whole new state. We’ll have to figure out what’s the compliance, what are the testing requirements, what are the packaging and labeling requirements? So I’ll just use Curaleaf (OTCPK:CURLF) as an example. Chances are, whatever brands they are selling in Arizona, those same brands are selling them in Massachusetts. There’s most likely different packaging requirements, different labeling requirements.

Not to mention the fact that they have to have a completely separate manufacturing facility in every state to make the exact same products. Wouldn’t it be easier just to have one manufacturing facility somewhere and export across the country?

RS: Yeah. Do you feel like that there’s something that investors aren’t paying attention to – or aren’t paying enough attention to, at this point in time in the industry?

JC: Well, I know there’s a lot of, I call them small to midsized cannabis companies right now. They might be in one or two or three states. They may not have that many dispensaries, but they have some phenomenal leadership, and their stocks right now are just so, so low, it’s just such great value. So, I mean, and even some better midsize companies like, I’ll use 4Front (OTCQX:FFNTF), 4Front Ventures as an example. Their stock is got around $0.60 the last time I checked. It might be up now. But there’s a lot of really good buys out there.

But you just have to separate, there’s so many public cannabis companies, right, a lot of them are garbage. You really got to take a close look at all right, who are the good operators that will most likely succeed. But there’s definitely retail investment opportunities and a lot of public stocks right now.

RS: That’s interesting. You’re the second person that’s come on in a couple of weeks that’s mentioned 4Front specifically in terms of mid-tiers to look at. And it’s the exact question of like, do you feel like, there’s something being ignored and they were like, there’s some operators there that people aren’t looking at it. 4Front was their answer also, very interesting.

JC: I mean, 4Front is about to go online with I don’t know, 4Front is going to probably be the largest producer in all Illinois in terms of cultivation capacity, that facilities are I don’t believe it’s up and running yet. But that’s why I mentioned earlier, a lot of these big companies, even though they say that we have this many licenses in this many states, the majority of those are still being built out. So, I think a lot of these public companies, their best years are ahead.

RS: So, we talked about stocks, is there anything or kind of what are you thinking about product wise? Like, as we’re talking about this maturing developing industry coming online, and in more places. What are you thinking about in terms of or are you thinking about in different kind of products or developing beverages or different form factors? Or are you just excited about the development of access and all of that?

JC: Yeah, my greatest excitement revolves around the overall opportunity in certain geographic areas. New York as an example, there’s going to be billions made just cultivating flour, and there’ll be billions made with infused products. Same with beverages, young beverages. Gosh, 10 years ago, 11 years ago, I used to sell some of the early-early beverages in my first dispensary Dixie Elixirs keep cola. This is back when both of those brands had pot leafs just plastered all over their bottles. So those brands have developed big time over the years.

Drinks have always been out there. But I’ve recently been seeing some really interesting drinks, large bottles of infused beverage that could be mixed up with mixers, just like you’re mixing a cocktail. 12-ounce bottles where you can actually drink an entire bottle, knock yourself to take a sip and fear of getting too much effect from what’s in that bottle. So, I think beverages have evolved, I think will continue to evolve and I definitely believe that it will be a very important and profitable sector of the business.

RS: And in terms of the retail picture, I mean, you mentioned before like an underground cannabis consumption lounge. Are you thinking about consumption lounges like in the East Coast as the adult use develops? How are you envisioning the retail picture developing, or how people are consuming and getting their cannabis legally?

JC: I love the idea of the consumption lounges. But I’ve never been able to really get too excited about the financials of a consumption lounge. But then unless, of course, they have a strong retail component on site. In Colorado, we allow for consumption lounges, but to this day, I don’t believe sales are allowed at those lounges. I may be wrong, that may have changed recently or is in the process of changing. But in New York, New Jersey, a good consumption lounge, again, with a good vibe, a good brand, and a good retail experience I think such a business could do quite well.

RS: Because of the location, like specifically because you’re in New York and that area and it’s kind of already set the stage for it?

JC: Yeah, there’s going to be a lot of lounges I think in that whole tri state area in the Northeast, and I think some of them will do well. And just like any other business in any other industry, some of them will probably fail.

RS: Mm hmm. And do you feel like there’s going to be like different hubs or different areas of the states that are going to be known for different things? Like, do you think like, the East Coast is going to have cannabis consumption lounges, and West Coast will have so, do you think of it that way?

JC: I know both of the East Coast and the West Coast will eventually have a mature consumption lounge industry.

RS: But in terms of like other things, like do you think of it, like, I don’t know, you know how wine from different regions, different wines are known for different things. Or do you feel like it’s going to be like that or just culturally sometimes things develop in a certain way?

JC: I think the local culture will affect the brands and the brand story. That’s the biggest differentiator that I believe we’ll see from one coast to the other. In terms of products I don’t know, I think it’s the same products right now.

RS: So, is there anything that worries you as you look kind of in this developing picture? Is there anything where you’re like, well, if this happens that would put a pin in this bubble? Is there anything like that, that you think about or that feels like might come down the pike to put some challenges?

JC: It’s certainly, it’s really important, especially as an investor to keep an eye on what these challenges might be. But I’ve been in this industry for 13 years and I mean, if you’re adverse to risk, right, this is not the industry to be in. So I have a very, very high tolerance for risk. So, believe it or not, and I don’t spend a whole lot of energy thinking about what the potential risks could be because there’s plenty of there out there. The most important thing is to be able to adapt quickly. I’ll use the Northeast right now. We don’t know how this program is going to develop. We don’t know what license requirements are going to be.

Number of licenses, local restrictions. And things change over time, even right here in Colorado, we probably have one of the most mature and stable industries in the country, if not the world. But we get the occasional curveball popping up all the time in terms of some group proposing some new bill that might curtail the industry or cause additional expense for the industry. So, one thing for sure, change is going to happen, challenges are going to pop up daily in this industry. So, you have to have a high tolerance for risk and be good at adapting and have a most importantly, have a positive mental attitude.

RS: Yes, I think that would serve us all well, investing and beyond.

JC: For sure.

RS: Yeah, absolutely. Well, Jay, this has been a great conversation. I feel like the only thing that I would want to end with is wondering if you feel like as investors looking at kind of what’s happening in the industry. And as you said, you need to love risk. And I think it’s clear to anybody investing in the cannabis space why that’s true.

Do you have any kind of insight or thoughts about catalysts in terms of like a change in the market and what would change around the share price for these companies, because a bunch of these companies are really great operators doing really great things and yet, it’s not reflected? Do you have an opinion or thought about like, what’s going to change that?

JC: Well, it’s really, it’s just been market sentiment, right. And investor sentiment. The values of these cannabis stocks peaked, what about this time last year, I think. A lot of them, well, all of them have slid over the last year, and a lot of them are down probably 50% from their peak, if not more. But that’s not because these companies have had challenges. I mean, some have of course, but the majority of these companies have a stronger balance sheet, much higher sales and higher profitability than they did a year ago. So, it’s really just market sentiment.

It’s funny, every once in a while, when I have a portfolio of public cannabis stocks, and I’ll take a look at it every few days and sometimes you see them trending up for a few days. I’m like, oh, there must be some talking at a national level about a new bill. And sure enough, there is. So, that seems to drive a speculation over federal legalization seems to drive the stock price of cannabis stocks much more than how they’re actually doing and their numbers which I think is kind of silly, but that’s just the way it is.

RS: Yeah. And you feel like it’ll just eventually work itself out as the picture develops?

JC: I do. I definitely do. I’ll also make mention just in terms of investing and helping to do our part to build the industry, we’re in the process of accepting call it, applications really, pitch information for a program that we’ve implemented in New York State. It’s for local startups, it was for New York based startups in cannabis. We call it our Pitch Deck Competition. We’re going to be doing a final round of evaluation, I believe May 18th in New York City, at the MGM pact event. And we’re going to be looking for interest like a mom-and-pop startup, a small startup to not only invest anywhere between $50,000 to $500,000 into but also provide $150,000 Consulting scholarship from Canada advisors to do all the license application work.

So, we’re looking for one good group and there may be an opportunity for others to co invest in some of these companies with us, especially if we find more than one gem.

RS: Very cool, very cool. Love to hear it. Love to hear spreading it, spreading it around, pin it forward. Jay, thanks so much for coming on and sharing your articulate insights once again, really appreciate it.

JC: My pleasure. It’s fun. Anytime.

Thanks so much for listening to The Cannabis Investing Podcast. Subscribe or follow us on Seeking Alpha, Libsyn, Apple podcasts, Spotify or Stitcher and we’d really appreciate it if you left us a review on Apple podcast. It helps other investors find our show and makes us feel fantastic. If you have feedback or questions, we’d love to hear from you at rena+canpod@seekingalpha.com. Nothing on this podcast should be taken as investment advice of any sort. I’m long Trulieve, Khiron, Isracann BioSciences, The Parent Company, Ayr Wellness, and the ETF MSOS. Subscribe to us on Libsyn Apple podcast, Spotify or Stitcher. Thanks so much for listening and see you next time.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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