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Cannabis Law Now Podcast: Cannabis Investing in the U.S. - The Good, the Bad, and the Ugly

 

Published:

March 18, 2024

Related Industry:

Food Systems 

Related Service:

Cannabis 
 
Podcast

    

Cannabis investing is risky business. The current federal conflict, a punitive federal income tax situation, and an inability to access financial institutions put off many institutional investors. Not so though for Emily Paxhia, seasoned institutional investor and one of the very first institutional investors in cannabis via Poseidon Asset Management. In this episode, Emily and Hilary discuss the past, present, and future of cannabis investing in the United States. Emily shares her insights on the biggest booms and busts for Poseidon and what she sees on the horizon for cannabis reform as it impacts investors of all kinds. Despite the current volatility for the U.S. cannabis industry, having launched multiple cannabis-focused funds in the past 10 years, Emily has high hopes for the future expansion of and innovation in the U.S. cannabis industry.

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This transcript has been auto-generated and may contain technological errors.

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[Music]

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[Applause]

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[Music]

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welcome I'm your host Hilary Bricken and

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this is the Cannabis law Now podcast

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where we regularly discuss issues

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related to the Cannabis industry

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including investment day-to-day

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operational issues and potential reform

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on the horizon that will impact all

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cannabis businesses and investors in the

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United

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States hey everybody Welcome to the

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power podcast today I have a super

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fascinating guest she is my first what I

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would call institutional cannabis

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investor on the podcast and so far my

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first female participant which I'm very

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excited about she's going to bring I

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think an improved perspective to the

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conversation based on her many many

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years of experience in the Cannabis

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industry today we have Emily Paxhia who

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is the co-founder and managing partner

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of Poseidon Investment Management

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welcome Emily thank you so much Hilary

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thank you for having me here today yes I

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feel like I'm in the presence of you

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know some some deity Godlike person

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because you're still here uh and I say

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that a little bit tongue and cheek but

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it looks like and you know we're going

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to talk about this but the fund your

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funds and your investment Finance

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presence you have been around for a

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decade plus which in cannabis cannabis

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years are like dog years in my opinion

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right you've probably heard that before

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that makes you about a thousand years

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old in this

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industry we are dinosaurs for cannabis

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investing for sure we have seen a few

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turns in this cycle of this emerging

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market for sure yeah I can imagine so

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let's jump right into it were you and

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Poseidon maybe the first cannabis fund

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ever on the map yeah for a long time and

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you will appreciate this our lawyers

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were saying you can't say that but now

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they're kind of like actually we think

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you can say that you know there were

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other companies that were investing or

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allocating into the industry but the way

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they were doing it was a a different I

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would say a different structure and so

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from a kind of a diversified fund

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actively managed institutional

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perspective I think we were probably the

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first to actually do it and you know

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back to the legal fears because when I

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jumped in in 2010 it was unheard of that

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corporate attorneys transactional

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lawyers would participate it was not a

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thing and I was back in Washington state

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right which predates legalization and

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really getting its regulatory act

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together you don't have to invade the

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attorney Cent privilege but generally

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were your lawyers telling you you know

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you could go to prison for doing this I

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mean what what was the General kind of

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attitude then yeah you know we're ba

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we're based out of San Francisco and I

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think there's a little bit of a

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pioneering mindset in San Francisco

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where it's you know been the Gold Rush

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the tech era was born here truly I mean

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between here and Seattle really and I

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think that pioner mindset came in very

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handy for us when it came to sourcing

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our legal support and you know I'll give

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him credit Bart M melon stood right by

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us and together a lot of funds and and

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tends to be a forward-looking person he

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does a lot of kind of emerging sector

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things he was also early in crypto

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helping crypto funds form and I think he

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just saw that but I mean I tell

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everybody every day I just read my own

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PPM LPA and uh it gets me a little

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sweaty around the collar when I look at

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some of the risks I've taken on over the

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years to be the manager of this and you

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know when Morgan and Morgan's my brother

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and business partner when we were

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putting this together truly did want to

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put together the infrastructure to be an

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Institutional investment firm in

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cannabis we launched with one fund but

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we always had aspirations to have more

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products and opportunities to allocate

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Capital into the sector and when we did

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it we over 20 you know 2012 is when we

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really started to put this all together

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first day of trading was January 2014

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when Colorado opened actually delayed

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launching the fund through 2013 to do

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that so we would hit the timing on that

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right it's all about timing but he and I

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we really did like the exercise of

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looking at the worst case scenario of

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how this could go being allocators of

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capital into a schedule one product that

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was only technically kind of medically

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legal but not really from a business

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standpoint in a few markets and then you

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know adult use opening in Colorado Then

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followed by Washington and Alaska of all

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markets but it was a real risk that we

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looked at and just another interesting

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piece on that is that our very first

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investor was a lawyer and I always say

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the reason and actually followed by a

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few other lawyers and I always say there

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was this Delta between perceived versus

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actual risk and I think that they saw

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that as the opportunity to get it and

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they've done really well with us over

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the years so I'll never forget them your

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foresight is outstanding I think to

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approach the industry in this capacity

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how in the early days I know you

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mentioned the attorneys who I think

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would intimately

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understand actual versus perceived risk

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grade degrees how were you able to get

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other investment with something so

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legally precarious because I know when I

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would talk to people they would either

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be Allin guns of Blazing Woody harelson

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natural board Killers or going to that

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or they wanted nothing to do with it for

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us we realized we had to be an

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educational platform and an

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informational platform as well as

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investors and it's you know one of the

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things when you really want to become an

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expert or completely immersed in a

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category is to digest it and then to

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educate other people about it because

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then you know it inside and out and so

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we just became a source of information

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we also incredibly we leaned in

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incredibly close on the policy side so

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the first thing we did was we joined the

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ncia and then right after that we joined

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the marijuana policy project we joined

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the ccia I mean we have been involved in

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every possible way to support the reform

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that would be coming from a legal

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standpoint on the industry and I was on

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the board of the marijuana policy

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project for a period of time which was

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incredibly educational experience for me

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because I didn't come from a background

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of politics but I will I'm a voracious a

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student and will learn whatever I can

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get my take whatever I can get my hands

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on and at the time the marijuana policy

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project was actually not a business

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organization they were focused on

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changing laws around cannabis from a

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criminal justice standpoint but you know

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Morgan my my brother always says my my

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baby brother who's quite wise and I call

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him the little buddha but he was Bor

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with a calculator in his hand by the way

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but he always says capital is a change

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agent and I think that's the absolute

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truth and so if you wanted to be a part

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of the change you had to lean in on it

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but I think that gave our investors who

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would end up joining us Comfort because

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they knew we were so actively engaged

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and involved and very clear on the risks

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and the opportunities that existed based

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on how laws were changing and the

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perception of lawmakers around cannabis

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so we hit the timing pretty well because

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the full memo there's three versions of

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the memo but the first and second

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happened very quickly within the time

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that we were launching the fund I think

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the first was in August right before we

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launched and then the second one I think

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came out in like February or March right

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after we launched so good things were

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happening that were showing

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directionally positive Evolution around

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cannabis and the perception of cannabis

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as a legal market right and those were

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in my opinion those were good times when

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the doj was willing to show the

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enforcement hand and brought some sanity

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to the madness that is the state federal

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conflict and we kind of have not seen

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that since and and on the back of that I

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really want to know because I feel like

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similar to me you've probably seen it

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all because you've been around for years

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what have you seen as a seasoned

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investor as a corporate advisor evolve

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and change in the last decade plus well

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I think a lot of folks are very very

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much hung up on this a couple of

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catalysts I break Catalyst down actually

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into two things I view there are

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catalysts that actually drive growth and

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fundamental improvements in these

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businesses and I would say those are new

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states opening those are you know more

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and sophisticated and better service

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providers coming in to support the

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industry you know like better law firms

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over time better insurance providers tax

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audit all of those things that improve

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the fundamentals and the governance of

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these businesses as this industry

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matures so those are those are different

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kind of business fundamental catalysts

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and then there's these exogenous

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catalysts that I think are The

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Gatekeepers of Capital flowing into the

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industry and those would be things like

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the safe Banking Act you know scheduling

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of cannabis these various things at the

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federal and legal cases working through

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the judicial judicial process so I think

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those are different things but I don't

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think we should overlook the amount of

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change that has occurred over the last

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10 plus years where now over half of the

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United States live in a state where they

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have legal access to cannabis we have a

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cannabis native generation of genz

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that's entering the workforce with share

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of wallet and when I talk about things

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it's always 21 plus I just want to set

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that is we never are talking about

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unless it's a medical situation where

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cannabis is a medical platform for

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someone with like epilepsy or something

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like that I'm talking about recreational

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it's always adult use above 21 plus I

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always just like to set that standard

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for anyone listening there are folks

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entering the workforce with a share of

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wallet they can allocate to cannabis

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over alcohol and we know this is a

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generational Trend that's shifting in

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our society and I think that the

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confluence of that with also what's

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going on with the potential of federal

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reform plus new States opening and the

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Gallup poll results just came out

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yesterday or recently and we're at 70

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00:09:40,200 --> 00:09:45,519
70% approval rating to legalize cannabis

268
00:09:43,279 --> 00:09:47,200
at across the United States I mean I

269
00:09:45,519 --> 00:09:49,440
make the joke that we can't all even get

270
00:09:47,200 --> 00:09:51,519
aligned on our pop stars or or Taylor

271
00:09:49,440 --> 00:09:53,120
Swift for God's sakes like fluffy things

272
00:09:51,519 --> 00:09:55,279
like that but we can get aligned on one

273
00:09:53,120 --> 00:09:57,079
thing and that is cannabis legalization

274
00:09:55,279 --> 00:09:58,800
so I don't think this means cannibal

275
00:09:57,079 --> 00:10:00,120
cannabis legalization is coming

276
00:09:58,800 --> 00:10:02,640
overnight but I hope that these

277
00:10:00,120 --> 00:10:05,040
politicians in this election cycle are

278
00:10:02,640 --> 00:10:07,519
taking a look at how their constituents

279
00:10:05,040 --> 00:10:09,399
are are leveling up on this on this

280
00:10:07,519 --> 00:10:10,760
particular issue so those are a lot of

281
00:10:09,399 --> 00:10:13,200
the things that I've seen change I've

282
00:10:10,760 --> 00:10:14,720
also seen an arc of a business change in

283
00:10:13,200 --> 00:10:16,560
our industry when we first started

284
00:10:14,720 --> 00:10:18,240
investing in this industry some of our

285
00:10:16,560 --> 00:10:19,800
investments were in Canada and like a

286
00:10:18,240 --> 00:10:21,880
metric that was thrown around then was

287
00:10:19,800 --> 00:10:23,480
on funded capacity which we always were

288
00:10:21,880 --> 00:10:25,640
nervous about that metric which is

289
00:10:23,480 --> 00:10:28,200
essentially saying like how built out is

290
00:10:25,640 --> 00:10:29,360
their capacity to cultivate cannabis to

291
00:10:28,200 --> 00:10:31,600
distribute through the infrastru

292
00:10:29,360 --> 00:10:33,240
structure of the legal market and I

293
00:10:31,600 --> 00:10:35,000
would say there was not a lot of good

294
00:10:33,240 --> 00:10:36,680
shepherding of capital at that time it

295
00:10:35,000 --> 00:10:38,720
was very hype driven it wasn't really

296
00:10:36,680 --> 00:10:40,519
based on how the shape of these

297
00:10:38,720 --> 00:10:43,000
businesses would actually fast forward

298
00:10:40,519 --> 00:10:44,839
to today where we have not had Capital

299
00:10:43,000 --> 00:10:46,760
flowing into the industry and actually

300
00:10:44,839 --> 00:10:48,800
for anyone who's kind of newer to this

301
00:10:46,760 --> 00:10:50,560
or hasn't P paying attention to it you

302
00:10:48,800 --> 00:10:53,440
can see where the stock started to sell

303
00:10:50,560 --> 00:10:55,560
off in was February 2021 when the Aros

304
00:10:53,440 --> 00:10:58,680
event happened with credit Swiss which

305
00:10:55,560 --> 00:11:01,560
no long rip credit swiss but you know we

306
00:10:58,680 --> 00:11:03,399
lost a lot of custody for as for stocks

307
00:11:01,560 --> 00:11:05,959
in the industry and so we lost a lot of

308
00:11:03,399 --> 00:11:08,360
institutional capital and without the

309
00:11:05,959 --> 00:11:10,600
size and Long View of institutional

310
00:11:08,360 --> 00:11:13,279
capital on a sector the the industry has

311
00:11:10,600 --> 00:11:15,720
been very under capitalized and it's

312
00:11:13,279 --> 00:11:17,959
gone from there too I mean then you know

313
00:11:15,720 --> 00:11:19,920
all of the things happened uh since then

314
00:11:17,959 --> 00:11:22,120
with the failure of Reform at the

315
00:11:19,920 --> 00:11:24,519
federal level around perfunctory banking

316
00:11:22,120 --> 00:11:26,360
legislation things like that none of

317
00:11:24,519 --> 00:11:28,120
this means that the businesses of

318
00:11:26,360 --> 00:11:29,959
cannabis aren't continuing to be

319
00:11:28,120 --> 00:11:31,800
interesting and so where we today and

320
00:11:29,959 --> 00:11:33,240
what we've seen this amazing Arc come

321
00:11:31,800 --> 00:11:34,920
out to is that we really do have a

322
00:11:33,240 --> 00:11:36,959
better understanding of these businesses

323
00:11:34,920 --> 00:11:39,120
we know what to look for in terms of

324
00:11:36,959 --> 00:11:41,920
sgna containment gross margin

325
00:11:39,120 --> 00:11:44,320
percentages Eva do profiles and you can

326
00:11:41,920 --> 00:11:46,360
really examine these businesses and have

327
00:11:44,320 --> 00:11:48,160
stronger and clearer expectations of

328
00:11:46,360 --> 00:11:50,120
what a good business should look like in

329
00:11:48,160 --> 00:11:52,519
cannabis and then alongside of that all

330
00:11:50,120 --> 00:11:54,200
of the ancillary technology platforms

331
00:11:52,519 --> 00:11:56,839
have just grown and grown and grown and

332
00:11:54,200 --> 00:11:59,320
there's just amazing Evolutions in those

333
00:11:56,839 --> 00:12:01,320
Technology Solutions and also in the

334
00:11:59,320 --> 00:12:04,120
data that those companies are capturing

335
00:12:01,320 --> 00:12:06,680
around consumers of cannabis and what

336
00:12:04,120 --> 00:12:08,600
are some of the sectors in cannabis or

337
00:12:06,680 --> 00:12:11,240
the companies in cannabis that Poseidon

338
00:12:08,600 --> 00:12:13,040
had faith in so much so that it invested

339
00:12:11,240 --> 00:12:14,800
I know it's fairly diverse because

340
00:12:13,040 --> 00:12:17,199
Poseidon's information on its website is

341
00:12:14,800 --> 00:12:19,240
pretty candid um about Investments over

342
00:12:17,199 --> 00:12:22,360
the years so can you share that with us

343
00:12:19,240 --> 00:12:24,880
so we were early in h Canada when the

344
00:12:22,360 --> 00:12:27,959
cannabis companies up there experienced

345
00:12:24,880 --> 00:12:29,560
massive valuation growth we took our

346
00:12:27,959 --> 00:12:31,199
returns off the table and did very very

347
00:12:29,560 --> 00:12:32,880
well and rotated our Capital into the

348
00:12:31,199 --> 00:12:34,800
United States and we were investors

349
00:12:32,880 --> 00:12:37,399
early in companies like GTI when they

350
00:12:34,800 --> 00:12:39,920
had 30 people at the table and so from

351
00:12:37,399 --> 00:12:43,000
there and I mean the phrase the acronym

352
00:12:39,920 --> 00:12:44,959
MSO did not exist at that time now we

353
00:12:43,000 --> 00:12:46,320
all know what a multi-state operator is

354
00:12:44,959 --> 00:12:48,440
yeah you know we were investing in

355
00:12:46,320 --> 00:12:50,199
Canada before people called them LPS or

356
00:12:48,440 --> 00:12:52,199
licensed producers so it's like you know

357
00:12:50,199 --> 00:12:54,000
you're kind of investing in the actual

358
00:12:52,199 --> 00:12:56,199
business before it becomes like this

359
00:12:54,000 --> 00:12:59,480
popular concept but what we like in the

360
00:12:56,199 --> 00:13:03,240
US are focusing on markets where there

361
00:12:59,480 --> 00:13:06,240
is clear regulation legal versus elicit

362
00:13:03,240 --> 00:13:08,399
operations we like full vertical we were

363
00:13:06,240 --> 00:13:09,959
very interested in kind of looking and

364
00:13:08,399 --> 00:13:12,199
by the way it's not how we thought we

365
00:13:09,959 --> 00:13:14,760
would want to invest but we've seen how

366
00:13:12,199 --> 00:13:16,959
it plays out where if you're just in the

367
00:13:14,760 --> 00:13:19,399
cultivation you can be susceptible to

368
00:13:16,959 --> 00:13:21,800
certain Market issues or regulatory

369
00:13:19,399 --> 00:13:23,240
shifts even versus what goes on on the

370
00:13:21,800 --> 00:13:24,680
full vertical same thing if we are in

371
00:13:23,240 --> 00:13:26,800
the middle of the supply chain on

372
00:13:24,680 --> 00:13:28,839
manufacturing so we've seen how

373
00:13:26,800 --> 00:13:29,639
regulation and enforcement can actually

374
00:13:28,839 --> 00:13:31,519
impct

375
00:13:29,639 --> 00:13:33,720
disproportionately those aspects of the

376
00:13:31,519 --> 00:13:36,079
vertical so now we kind of like the full

377
00:13:33,720 --> 00:13:37,480
vertical or we really just like retail

378
00:13:36,079 --> 00:13:39,440
and so that's kind of where we've

379
00:13:37,480 --> 00:13:41,040
evolved to although we've invested

380
00:13:39,440 --> 00:13:43,240
across all of those things pure

381
00:13:41,040 --> 00:13:46,000
cultivation pure manufacturing and

382
00:13:43,240 --> 00:13:48,519
distribution pure retail done very very

383
00:13:46,000 --> 00:13:50,240
little in pure Brands and it's because

384
00:13:48,519 --> 00:13:52,399
being someone who came from a background

385
00:13:50,240 --> 00:13:54,639
of research and Consulting on consumer

386
00:13:52,399 --> 00:13:57,600
products for companies like PepsiCo I

387
00:13:54,639 --> 00:13:59,639
know how difficult building a brand is

388
00:13:57,600 --> 00:14:01,560
and then maintaining Market share on a

389
00:13:59,639 --> 00:14:03,360
brand is so I had just enough

390
00:14:01,560 --> 00:14:05,560
information to scare me enough that we

391
00:14:03,360 --> 00:14:07,440
avoided a lot of the frothy investing

392
00:14:05,560 --> 00:14:09,040
into Brands and have focused more on the

393
00:14:07,440 --> 00:14:11,279
verticals so we like the verticals we

394
00:14:09,040 --> 00:14:13,079
like the states where they enforce legal

395
00:14:11,279 --> 00:14:14,680
programs we're still actually in

396
00:14:13,079 --> 00:14:16,240
California because I'm still a big

397
00:14:14,680 --> 00:14:19,160
believer this is like the tip of the

398
00:14:16,240 --> 00:14:21,040
spere of what a mature Market with great

399
00:14:19,160 --> 00:14:22,920
Brands and products can look like even

400
00:14:21,040 --> 00:14:25,440
if it's incredibly hard and I do think

401
00:14:22,920 --> 00:14:27,880
the state has could be doing a better

402
00:14:25,440 --> 00:14:29,600
job to get more things open and to help

403
00:14:27,880 --> 00:14:32,000
consumers have more access and maybe

404
00:14:29,600 --> 00:14:34,480
rethink the way the taxes are done here

405
00:14:32,000 --> 00:14:36,519
but nonetheless it's kind of like I have

406
00:14:34,480 --> 00:14:38,079
Associated it with an athlete training

407
00:14:36,519 --> 00:14:39,959
at altitude if you can make it in

408
00:14:38,079 --> 00:14:41,560
California I think you can make it and

409
00:14:39,959 --> 00:14:43,639
if you can run a marathon at altitude

410
00:14:41,560 --> 00:14:45,880
you can run a marathon at sea level with

411
00:14:43,639 --> 00:14:47,639
your you know eyes Clos so I think

412
00:14:45,880 --> 00:14:49,680
anybody who does well in California

413
00:14:47,639 --> 00:14:51,680
could be like a a leader and have to do

414
00:14:49,680 --> 00:14:53,880
well in other markets we like that on

415
00:14:51,680 --> 00:14:55,920
the technology side we have done things

416
00:14:53,880 --> 00:14:58,440
on the retail optimization and point of

417
00:14:55,920 --> 00:15:00,680
sale which we love and those Investments

418
00:14:58,440 --> 00:15:02,880
have gone pretty well and then we love

419
00:15:00,680 --> 00:15:04,440
the data side of it because of

420
00:15:02,880 --> 00:15:06,639
everything I'm talking about here I mean

421
00:15:04,440 --> 00:15:08,320
this is at the end of the day a consumer

422
00:15:06,639 --> 00:15:11,560
product at the end of the day it's

423
00:15:08,320 --> 00:15:14,079
eating into the bevel category AAL base

424
00:15:11,560 --> 00:15:16,480
but it's coming and so the value of that

425
00:15:14,079 --> 00:15:18,560
data and the consumer trending around

426
00:15:16,480 --> 00:15:21,320
health and wellness through to just pure

427
00:15:18,560 --> 00:15:23,320
consumer lifestyle stuff in cannabis is

428
00:15:21,320 --> 00:15:25,079
going to be valuable and interesting to

429
00:15:23,320 --> 00:15:27,079
people when they finally start to come

430
00:15:25,079 --> 00:15:29,319
into the sector yeah I think that's

431
00:15:27,079 --> 00:15:32,120
right now a little bit about these past

432
00:15:29,319 --> 00:15:34,639
Investments can you give us maybe the

433
00:15:32,120 --> 00:15:37,160
makeup of your top most successful

434
00:15:34,639 --> 00:15:39,959
investment and then I got to ask it

435
00:15:37,160 --> 00:15:41,800
maybe the profile of the worst meaning

436
00:15:39,959 --> 00:15:43,560
what elements made up your most

437
00:15:41,800 --> 00:15:45,519
successful investment and I know that's

438
00:15:43,560 --> 00:15:47,240
very Broad and then same question for

439
00:15:45,519 --> 00:15:49,360
maybe one that gave you a little

440
00:15:47,240 --> 00:15:51,480
heartburn I I would say we've done

441
00:15:49,360 --> 00:15:52,959
incredibly well in a number of things

442
00:15:51,480 --> 00:15:55,759
like for example we were early in

443
00:15:52,959 --> 00:15:57,360
private in afria which those new to the

444
00:15:55,759 --> 00:15:59,920
sector wouldn't even know who that is

445
00:15:57,360 --> 00:16:02,240
anymore because afria is now till R

446
00:15:59,920 --> 00:16:04,000
which waser I mean it's like there's so

447
00:16:02,240 --> 00:16:05,720
many iterations to these companies but

448
00:16:04,000 --> 00:16:07,720
we were in that thing sub at dollar

449
00:16:05,720 --> 00:16:11,360
Canadian and we rotated out of it on

450
00:16:07,720 --> 00:16:13,480
like a very beautiful multi-digit X

451
00:16:11,360 --> 00:16:14,800
return on that thing and rotated into us

452
00:16:13,480 --> 00:16:16,360
we did really well on that GW

453
00:16:14,800 --> 00:16:18,440
pharmaceutical was our first investment

454
00:16:16,360 --> 00:16:20,800
in the first fund that we saw a great

455
00:16:18,440 --> 00:16:22,880
outcome once epids you know hit the

456
00:16:20,800 --> 00:16:24,920
market and the clinical trials had

457
00:16:22,880 --> 00:16:27,519
proven out on that thing we had some

458
00:16:24,920 --> 00:16:29,600
other great I mean I would say GTI I I

459
00:16:27,519 --> 00:16:32,360
always called it The Quiet Riot we were

460
00:16:29,600 --> 00:16:35,000
in it early and we mult we invested Time

461
00:16:32,360 --> 00:16:36,600
After Time After Time into that company

462
00:16:35,000 --> 00:16:39,639
it was a Quiet Riot they weren't the

463
00:16:36,600 --> 00:16:41,519
froy medm or acreages of the world they

464
00:16:39,639 --> 00:16:43,319
have just been focused on preserving and

465
00:16:41,519 --> 00:16:45,440
growing shareholder value and have done

466
00:16:43,319 --> 00:16:47,000
that well and and focusing on you know

467
00:16:45,440 --> 00:16:48,759
balance sheet preservation all the

468
00:16:47,000 --> 00:16:50,240
things that they needed to do and I feel

469
00:16:48,759 --> 00:16:52,600
like they share a little bit of the like

470
00:16:50,240 --> 00:16:54,360
Buffet Monger mindset with Morgan and I

471
00:16:52,600 --> 00:16:56,680
about how businesses should be good

472
00:16:54,360 --> 00:16:59,240
businesses are run that has been a great

473
00:16:56,680 --> 00:17:00,880
returner time and time again for us so

474
00:16:59,240 --> 00:17:03,360
those are just some of the good ones

475
00:17:00,880 --> 00:17:05,720
there was a famous flame out that we had

476
00:17:03,360 --> 00:17:08,199
that was written about in Inc magazine

477
00:17:05,720 --> 00:17:10,559
by Willie yakowitz which was trative

478
00:17:08,199 --> 00:17:13,799
that one I would say like that was like

479
00:17:10,559 --> 00:17:16,919
the first crystallizing moment in the

480
00:17:13,799 --> 00:17:19,799
importance of board compos compositions

481
00:17:16,919 --> 00:17:22,679
and corporate governance and it was for

482
00:17:19,799 --> 00:17:25,520
me also a formative moment where there

483
00:17:22,679 --> 00:17:27,480
was this pivotal point and I don't even

484
00:17:25,520 --> 00:17:30,000
remember this guy's name but I we were

485
00:17:27,480 --> 00:17:31,200
on this board meeting and I had a very

486
00:17:30,000 --> 00:17:32,960
strong point of view which ended up

487
00:17:31,200 --> 00:17:34,760
being right point of view because my

488
00:17:32,960 --> 00:17:37,039
intuition was very strong about what was

489
00:17:34,760 --> 00:17:39,400
happening in this company this guy like

490
00:17:37,039 --> 00:17:41,760
basically shut me down and so I kind of

491
00:17:39,400 --> 00:17:44,160
retreated thinking oh I'm I must be off

492
00:17:41,760 --> 00:17:46,520
base here but I'll never do that again

493
00:17:44,160 --> 00:17:48,360
and so now I've always been a very vocal

494
00:17:46,520 --> 00:17:50,360
board member if I'm not comfortable with

495
00:17:48,360 --> 00:17:52,120
something that's happening that was a

496
00:17:50,360 --> 00:17:54,400
disappointing flame out it had a lot of

497
00:17:52,120 --> 00:17:55,919
promise that company but this is why

498
00:17:54,400 --> 00:17:58,159
from that moment forward board

499
00:17:55,919 --> 00:17:59,760
composition co-investors everything

500
00:17:58,159 --> 00:18:01,799
became and what what we were able to

501
00:17:59,760 --> 00:18:03,880
rescue out of that was accomplished

502
00:18:01,799 --> 00:18:05,640
through good co-investors so you know it

503
00:18:03,880 --> 00:18:07,600
cut both ways on that project although

504
00:18:05,640 --> 00:18:10,159
it ended up failing in the end thanks to

505
00:18:07,600 --> 00:18:12,720
a stupid lawsuit which I would say is it

506
00:18:10,159 --> 00:18:13,919
was bad lawsuit but anyway but then

507
00:18:12,720 --> 00:18:16,360
these are the things that can kill

508
00:18:13,919 --> 00:18:17,720
companies and you know you got you have

509
00:18:16,360 --> 00:18:21,120
to have good corporate governance and

510
00:18:17,720 --> 00:18:24,039
levers around managing through the

511
00:18:21,120 --> 00:18:27,720
chaotic environment of a startup I hear

512
00:18:24,039 --> 00:18:29,320
you and on the back of that given kind

513
00:18:27,720 --> 00:18:31,120
of the flat

514
00:18:29,320 --> 00:18:32,559
of the industry right now from state to

515
00:18:31,120 --> 00:18:34,919
state you mentioned California it's

516
00:18:32,559 --> 00:18:36,760
incredibly tough for both macroeconomic

517
00:18:34,919 --> 00:18:38,760
factors and Regulatory reasons you ever

518
00:18:36,760 --> 00:18:40,840
thought about cashing out completely and

519
00:18:38,760 --> 00:18:42,520
bailing and you know if not what what

520
00:18:40,840 --> 00:18:45,679
keeps you coming back why do you hold

521
00:18:42,520 --> 00:18:47,919
the flame of faith that this potentially

522
00:18:45,679 --> 00:18:50,000
will explode is it the data is it the

523
00:18:47,919 --> 00:18:51,720
intuition that you mentioned what is it

524
00:18:50,000 --> 00:18:53,320
I think it's a Confluence of factors

525
00:18:51,720 --> 00:18:55,799
that keep us coming back first of all

526
00:18:53,320 --> 00:18:57,679
we're Mission driven investors like we

527
00:18:55,799 --> 00:18:59,400
believe that cannabis should be legal

528
00:18:57,679 --> 00:19:01,039
and that people should have access to it

529
00:18:59,400 --> 00:19:03,159
both from a medical standpoint and from

530
00:19:01,039 --> 00:19:05,559
a lifestyle standpoint especially

531
00:19:03,159 --> 00:19:08,039
instead of alcohol I mean look I love

532
00:19:05,559 --> 00:19:10,120
alcohol whatever it's great big fan of

533
00:19:08,039 --> 00:19:11,640
tequila but I think that I want people

534
00:19:10,120 --> 00:19:14,240
to have options and I believe in the

535
00:19:11,640 --> 00:19:16,280
liberty of choice so all of that like

536
00:19:14,240 --> 00:19:17,960
aside I think when you're Mission driven

537
00:19:16,280 --> 00:19:20,480
you know I think about people who I

538
00:19:17,960 --> 00:19:22,240
admire like Steve Jobs he was incredibly

539
00:19:20,480 --> 00:19:23,880
passionate about his product and

540
00:19:22,240 --> 00:19:25,240
everything that Apple would stand for

541
00:19:23,880 --> 00:19:26,880
and that's how he got through the

542
00:19:25,240 --> 00:19:29,799
various cycles of that business it

543
00:19:26,880 --> 00:19:32,400
wasn't a straight line up it never is so

544
00:19:29,799 --> 00:19:34,960
what has kept me here is that I just try

545
00:19:32,400 --> 00:19:36,840
to stay very very close to what's

546
00:19:34,960 --> 00:19:38,600
actually happening in the businesses

547
00:19:36,840 --> 00:19:40,320
what's actually happening from a

548
00:19:38,600 --> 00:19:42,480
political standpoint or like the

549
00:19:40,320 --> 00:19:45,039
constituent acceptance and support

550
00:19:42,480 --> 00:19:46,559
around this issue and I just believe I

551
00:19:45,039 --> 00:19:48,559
you know when you come so far in

552
00:19:46,559 --> 00:19:50,159
something to throw in the towel to

553
00:19:48,559 --> 00:19:53,039
capitulate at this point even though

554
00:19:50,159 --> 00:19:54,960
it's been a very very difficult cycle 23

555
00:19:53,039 --> 00:19:57,120
was you know the worst year that we've

556
00:19:54,960 --> 00:20:00,360
had to manage through in terms of what

557
00:19:57,120 --> 00:20:02,799
really finally hit Road on this sector

558
00:20:00,360 --> 00:20:05,120
in terms of the Fallout of lack of

559
00:20:02,799 --> 00:20:06,760
capital flow lack of Reform and all the

560
00:20:05,120 --> 00:20:08,960
things that happened on the federal

561
00:20:06,760 --> 00:20:11,679
level and I think that was really what

562
00:20:08,960 --> 00:20:14,720
really catalyzed the challenges of 2023

563
00:20:11,679 --> 00:20:16,799
was when the safe banking failed to get

564
00:20:14,720 --> 00:20:19,120
included in 2022 so it was a chain

565
00:20:16,799 --> 00:20:21,039
reaction of events and then yeah there's

566
00:20:19,120 --> 00:20:23,080
a lot of factors but what I see right

567
00:20:21,039 --> 00:20:25,679
now is the most amazing setup after

568
00:20:23,080 --> 00:20:28,280
doing this for over 10 years is you have

569
00:20:25,679 --> 00:20:29,200
a generational consumer shift coming to

570
00:20:28,280 --> 00:20:30,880
Canabis

571
00:20:29,200 --> 00:20:32,360
like I I've always said the easiest

572
00:20:30,880 --> 00:20:34,840
thing about cannabis is that their's

573
00:20:32,360 --> 00:20:36,520
product Market fit and that's just for

574
00:20:34,840 --> 00:20:38,919
the the bell curve you know it's the

575
00:20:36,520 --> 00:20:41,039
bell curve widens out there's so many

576
00:20:38,919 --> 00:20:43,880
canic curious people who are coming into

577
00:20:41,039 --> 00:20:45,880
the category now so our tip of the Spear

578
00:20:43,880 --> 00:20:47,600
of the Cannabis enthusiasts who've been

579
00:20:45,880 --> 00:20:49,360
here and who have ready to participate

580
00:20:47,600 --> 00:20:50,480
in this adult use market like I mean

581
00:20:49,360 --> 00:20:53,360
I'll never forget when I went to the

582
00:20:50,480 --> 00:20:55,679
Ascend store in New Jersey and nobody

583
00:20:53,360 --> 00:20:58,080
knew I was an investor it's just going

584
00:20:55,679 --> 00:21:00,720
and the fact that I could chitchat with

585
00:20:58,080 --> 00:21:02,799
people wait in line in the winter

586
00:21:00,720 --> 00:21:05,080
looking forward to getting in and they

587
00:21:02,799 --> 00:21:07,200
were like how cool is this we can buy

588
00:21:05,080 --> 00:21:08,760
cannabis you know like unsolicited

589
00:21:07,200 --> 00:21:10,840
telling me how excited they were to have

590
00:21:08,760 --> 00:21:12,360
legal weed in New Jersey like those are

591
00:21:10,840 --> 00:21:14,159
the things that keep me going seeing

592
00:21:12,360 --> 00:21:15,799
patients who have access to good

593
00:21:14,159 --> 00:21:17,159
cannabis products that they didn't

594
00:21:15,799 --> 00:21:18,960
before those are the things that keep me

595
00:21:17,159 --> 00:21:21,159
going but from an investment standpoint

596
00:21:18,960 --> 00:21:23,120
it's the setup that I can't get over

597
00:21:21,159 --> 00:21:26,039
which is that consumer shift so a

598
00:21:23,120 --> 00:21:27,720
growing Tam the more states that open

599
00:21:26,039 --> 00:21:29,200
like Missouri and Maryland I mean when

600
00:21:27,720 --> 00:21:30,919
you look at the states when they open

601
00:21:29,200 --> 00:21:33,400
it's just incredibly exciting to see the

602
00:21:30,919 --> 00:21:36,440
sales data and the growth and and the

603
00:21:33,400 --> 00:21:38,240
diversification of product and baskets

604
00:21:36,440 --> 00:21:40,400
that happen with the consumers which

605
00:21:38,240 --> 00:21:43,480
shows again kind of that broadening of

606
00:21:40,400 --> 00:21:46,520
the bell curve and then I see the setup

607
00:21:43,480 --> 00:21:48,320
of the Catalyst that all the people

608
00:21:46,520 --> 00:21:49,799
outside of the industry are waiting for

609
00:21:48,320 --> 00:21:51,799
which is the potential for banking

610
00:21:49,799 --> 00:21:53,840
reform the potential for you know a

611
00:21:51,799 --> 00:21:56,200
lawsuit against the government that

612
00:21:53,840 --> 00:21:58,760
changes this the application of the CSA

613
00:21:56,200 --> 00:22:01,279
to these legal businesses in within

614
00:21:58,760 --> 00:22:03,880
States and the third being of course the

615
00:22:01,279 --> 00:22:05,559
scheduling of cannabis so I'm seeing a

616
00:22:03,880 --> 00:22:07,000
number of things setting up and that's

617
00:22:05,559 --> 00:22:08,279
what I can't look away from it because

618
00:22:07,000 --> 00:22:10,760
I've been here too long building

619
00:22:08,279 --> 00:22:12,480
businesses this whole time to do it so

620
00:22:10,760 --> 00:22:14,559
got it the only way out is through but

621
00:22:12,480 --> 00:22:18,000
it's not been easy if anyone thought it

622
00:22:14,559 --> 00:22:19,960
was easy they should spend a day with me

623
00:22:18,000 --> 00:22:21,600
I could uh I could scare the pants off

624
00:22:19,960 --> 00:22:24,880
of anyone about the things I've seen in

625
00:22:21,600 --> 00:22:26,720
an emerging market like this yeah I bet

626
00:22:24,880 --> 00:22:28,559
and there are so many exciting things

627
00:22:26,720 --> 00:22:29,679
about it and and maybe one of those

628
00:22:28,559 --> 00:22:31,360
things is the last thing that you

629
00:22:29,679 --> 00:22:34,679
mentioned kind of in the pillars of

630
00:22:31,360 --> 00:22:37,600
Reform and huge catalysts which is this

631
00:22:34,679 --> 00:22:39,880
potential on the horizon for a cannabis

632
00:22:37,600 --> 00:22:41,559
reschedule um and I keep saying unless

633
00:22:39,880 --> 00:22:43,080
you're living under a rock you know

634
00:22:41,559 --> 00:22:44,559
about this right this is the biggest

635
00:22:43,080 --> 00:22:46,880
thing potentially to happen to cannabis

636
00:22:44,559 --> 00:22:49,799
in decades and Decades of prohibition it

637
00:22:46,880 --> 00:22:53,679
is also in my opinion one of the most

638
00:22:49,799 --> 00:22:55,279
annoying loud karay filled things that's

639
00:22:53,679 --> 00:22:57,200
happening in the industry and I find

640
00:22:55,279 --> 00:22:59,080
these things insufferable because nobody

641
00:22:57,200 --> 00:23:01,440
no lawyer no regulator nobody has a

642
00:22:59,080 --> 00:23:04,240
crystal ball and this is complicated

643
00:23:01,440 --> 00:23:06,200
complex administrative rulemaking with

644
00:23:04,240 --> 00:23:09,039
potentially the public health and safety

645
00:23:06,200 --> 00:23:12,240
of millions at stake not to be dramatic

646
00:23:09,039 --> 00:23:14,120
but if schedule 3 happens number one

647
00:23:12,240 --> 00:23:15,840
what happens in your world as an

648
00:23:14,120 --> 00:23:18,559
investor as a wholesale cannabis

649
00:23:15,840 --> 00:23:20,880
investor and two you know what are you

650
00:23:18,559 --> 00:23:23,159
paying attention to about schedule 3 as

651
00:23:20,880 --> 00:23:25,360
an investor yeah sometimes I'm like oh

652
00:23:23,159 --> 00:23:27,600
is this just me after 10 years of being

653
00:23:25,360 --> 00:23:29,360
battle tested by waiting for something

654
00:23:27,600 --> 00:23:31,440
to happen and then it happens or doesn't

655
00:23:29,360 --> 00:23:32,799
happen or the recision of the coal memo

656
00:23:31,440 --> 00:23:34,440
or all the things that have happened

657
00:23:32,799 --> 00:23:36,640
through the course of having invested in

658
00:23:34,440 --> 00:23:38,760
cannabis or even the exogenous stuff

659
00:23:36,640 --> 00:23:40,520
that happens like the aragos event which

660
00:23:38,760 --> 00:23:42,520
changes the custody around the stock

661
00:23:40,520 --> 00:23:44,600
things like that or the risk profiles

662
00:23:42,520 --> 00:23:46,279
are like Cowen gets bought by TD and all

663
00:23:44,600 --> 00:23:48,000
of a sudden now they won't let you you

664
00:23:46,279 --> 00:23:50,120
know hold stocks with you know there's a

665
00:23:48,000 --> 00:23:53,799
lot of things that have gone on so then

666
00:23:50,120 --> 00:23:56,960
when when I see people boiling down such

667
00:23:53,799 --> 00:24:00,360
an important and complicated thing as

668
00:23:56,960 --> 00:24:02,600
the DEA approving the scheduling

669
00:24:00,360 --> 00:24:05,440
recommendation that came from the HHS

670
00:24:02,600 --> 00:24:07,960
and putting it forth as policy or as a

671
00:24:05,440 --> 00:24:10,120
framework it's we cannot be too

672
00:24:07,960 --> 00:24:12,000
reductionist about this and we have to

673
00:24:10,120 --> 00:24:14,400
think about every corner we have to look

674
00:24:12,000 --> 00:24:16,200
around associated with this and maybe

675
00:24:14,400 --> 00:24:18,080
it's because we had an investment in

676
00:24:16,200 --> 00:24:21,080
this company called PX and then juwel

677
00:24:18,080 --> 00:24:22,720
spun out of it and anyone who's watched

678
00:24:21,080 --> 00:24:24,400
what happened with juel knows what it's

679
00:24:22,720 --> 00:24:28,200
like to try to work with a federal

680
00:24:24,400 --> 00:24:31,039
agency the FDA really slapped around not

681
00:24:28,200 --> 00:24:33,480
just e Market but juwel in particular

682
00:24:31,039 --> 00:24:36,120
and the only thing I know about that is

683
00:24:33,480 --> 00:24:39,360
that the opacity of how these decisions

684
00:24:36,120 --> 00:24:42,679
are made is immense we have no to say we

685
00:24:39,360 --> 00:24:45,240
have a crystal ball is insane at best we

686
00:24:42,679 --> 00:24:47,480
have like an opaque rock that we're

687
00:24:45,240 --> 00:24:49,600
looking at to try to understand what the

688
00:24:47,480 --> 00:24:50,799
DEA is going to do and I always try one

689
00:24:49,600 --> 00:24:53,279
thing I learned when I was on the board

690
00:24:50,799 --> 00:24:55,320
of the mppp is like trying to understand

691
00:24:53,279 --> 00:24:58,399
the motivations of the groups who are

692
00:24:55,320 --> 00:25:01,360
involved in the decision making the daa

693
00:24:58,399 --> 00:25:04,120
is going to take this very seriously

694
00:25:01,360 --> 00:25:07,520
because the DEA has funding around the

695
00:25:04,120 --> 00:25:10,440
enforcement of Narcotics and cannabis is

696
00:25:07,520 --> 00:25:12,600
a schedule one sitting right in their

697
00:25:10,440 --> 00:25:15,600
wheelhouse of things that they get

698
00:25:12,600 --> 00:25:17,720
funded to oversee and they're also this

699
00:25:15,600 --> 00:25:20,679
is kind of embedded in the culture of

700
00:25:17,720 --> 00:25:22,840
the DEA around narcotics is the

701
00:25:20,679 --> 00:25:24,720
perception around cannabis not being a

702
00:25:22,840 --> 00:25:26,720
positive one not being one where there

703
00:25:24,720 --> 00:25:28,520
are good things coming from it and you

704
00:25:26,720 --> 00:25:31,039
can just go back and look at the history

705
00:25:28,520 --> 00:25:33,080
of this with President Nixon too so

706
00:25:31,039 --> 00:25:34,919
there's just so many things around this

707
00:25:33,080 --> 00:25:37,520
that I think it's just going to be a

708
00:25:34,919 --> 00:25:39,120
little bit more tumultuous than I think

709
00:25:37,520 --> 00:25:40,840
people think and then let's okay so then

710
00:25:39,120 --> 00:25:42,159
it's schedule three so what do what do I

711
00:25:40,840 --> 00:25:43,600
think about that I'm very excited

712
00:25:42,159 --> 00:25:45,360
because I do think it deserves to be

713
00:25:43,600 --> 00:25:47,559
moved out of schedule one and God forbid

714
00:25:45,360 --> 00:25:49,480
it goes into schedule two schedule 3 is

715
00:25:47,559 --> 00:25:51,640
fine we've always wanted it to be

716
00:25:49,480 --> 00:25:53,320
descheduled and treated like alcohol but

717
00:25:51,640 --> 00:25:55,320
we know that there's not a a

718
00:25:53,320 --> 00:25:57,320
constitutional amendment coming for

719
00:25:55,320 --> 00:26:00,880
cannabis the way that it came for

720
00:25:57,320 --> 00:26:03,080
alcohol so I think that once we so from

721
00:26:00,880 --> 00:26:05,200
an investment standpoint once we find

722
00:26:03,080 --> 00:26:07,120
out what the dea's point of view on this

723
00:26:05,200 --> 00:26:09,399
and what they hand down we have to

724
00:26:07,120 --> 00:26:10,960
spring into action immediately to try to

725
00:26:09,399 --> 00:26:13,120
understand what that'll mean and what

726
00:26:10,960 --> 00:26:15,080
that'll mean in terms of okay and what

727
00:26:13,120 --> 00:26:17,399
is you know we all talk about it as the

728
00:26:15,080 --> 00:26:19,039
exciting upside of the 280e tax code

729
00:26:17,399 --> 00:26:21,080
being removed which is you know

730
00:26:19,039 --> 00:26:23,360
egregiously applied to schedule one

731
00:26:21,080 --> 00:26:25,039
products for lack of a better word so

732
00:26:23,360 --> 00:26:26,480
that's exciting but how what's that

733
00:26:25,039 --> 00:26:27,919
going to look like and what's that going

734
00:26:26,480 --> 00:26:29,960
to look like from a federal tax

735
00:26:27,919 --> 00:26:31,799
perspective on the other side you know I

736
00:26:29,960 --> 00:26:34,760
don't I don't know the IRS probably

737
00:26:31,799 --> 00:26:36,799
enjoys the revenue they see from 280 and

738
00:26:34,760 --> 00:26:38,360
so does our government and so what does

739
00:26:36,799 --> 00:26:40,080
that look like so I'm not thinking this

740
00:26:38,360 --> 00:26:41,960
is like the Silver Bullet that solves

741
00:26:40,080 --> 00:26:43,720
all things which is why we are pursuing

742
00:26:41,960 --> 00:26:45,520
other things such as this case we're

743
00:26:43,720 --> 00:26:47,840
working with boy Schiller on as an

744
00:26:45,520 --> 00:26:49,960
industry and helping out these these

745
00:26:47,840 --> 00:26:51,640
defendants and trying to be people who

746
00:26:49,960 --> 00:26:53,520
pull things together but one thing I've

747
00:26:51,640 --> 00:26:55,159
learned over this you know course of

748
00:26:53,520 --> 00:26:57,960
time is you have to have multiple shots

749
00:26:55,159 --> 00:26:59,840
on goal to try to influence reform and

750
00:26:57,960 --> 00:27:02,760
so I'm not somebody who thinks this is a

751
00:26:59,840 --> 00:27:05,120
silver bullet but I do think though from

752
00:27:02,760 --> 00:27:07,720
Capital coming into the industry this is

753
00:27:05,120 --> 00:27:09,559
one of those catalytic moments and so

754
00:27:07,720 --> 00:27:11,960
for that I am excited because this

755
00:27:09,559 --> 00:27:14,600
industry deserves to be capitalized to

756
00:27:11,960 --> 00:27:16,600
drive innov to drive Innovation to drive

757
00:27:14,600 --> 00:27:19,200
support for the consumers and all the

758
00:27:16,600 --> 00:27:21,240
things that go on with investing into an

759
00:27:19,200 --> 00:27:23,559
Emerging Market well Emily I'm going to

760
00:27:21,240 --> 00:27:25,799
let you go with that question and that

761
00:27:23,559 --> 00:27:28,279
sentiment and I feel very confident that

762
00:27:25,799 --> 00:27:30,360
no matter what reform is on the horizon

763
00:27:28,279 --> 00:27:33,279
either tomorrow or years from now I will

764
00:27:30,360 --> 00:27:35,960
likely see you and Poseidon on the other

765
00:27:33,279 --> 00:27:37,600
side hopefully in a very very successful

766
00:27:35,960 --> 00:27:39,600
capacity for all of the time and

767
00:27:37,600 --> 00:27:41,240
Goodwill put in and I know personally

768
00:27:39,600 --> 00:27:43,840
and I can share that with listeners

769
00:27:41,240 --> 00:27:45,720
Poseidon has propped up many many

770
00:27:43,840 --> 00:27:47,399
operators in this industry that are

771
00:27:45,720 --> 00:27:49,159
still rocking and rolling today and

772
00:27:47,399 --> 00:27:52,080
without that this industry would be way

773
00:27:49,159 --> 00:27:54,360
weaker for it so Emily thank you for

774
00:27:52,080 --> 00:27:57,120
your opinions your insights super

775
00:27:54,360 --> 00:27:59,120
valuable we really appreciate it thank

776
00:27:57,120 --> 00:28:00,720
you

777
00:27:59,120 --> 00:28:03,519
and that concludes today's episode of

778
00:28:00,720 --> 00:28:06,930
the Cannabis law Now podcast until next

779
00:28:03,519 --> 00:28:10,709
time stayer stay

780
00:28:06,930 --> 00:28:10,709
[Music]

781
00:28:10,880 --> 00:28:13,880
alive

Professional:

Hilary Bricken

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