Leslie Bocskor, CEO and Chairman, Indoor Harvest Corp and Executive Chairman, Electrum Partners, LLC., joins the show, sharing his journey from corporate finance to recognizing the sector's potential. Bocskor discusses the impact of federal policies, the need for safer banking, and the importance of rescheduling cannabis for industry stability. He highlights the global implications of Germany's legalization and predicts significant market growth.
“The black-market thriving is hurting the regulated market because people are still buying from black-market operators because they don't have to deal with licensing, taxes, etc.” – Leslie Bocskor
The finer details of this episode:
Episode resources:
Timestamps:
The future of hemp and rescheduling (00:00:25)
Discussion about the future of hemp and the potential impact of rescheduling on the industry.
Leslie's background and entry into the cannabis industry (00:01:14)
Leslie’s personal journey into the cannabis and hemp industry, including his early experiences and professional background.
Challenges in the regulated cannabis industry (00:08:10)
The impact of federal tax burdens and lack of financing on the profitability and scaling of regulated cannabis businesses.
Native American operators and federal policy (00:10:50)
The advantage of Native American operators in the cannabis industry and the potential impact of federal policy on their businesses.
The need for federal leadership and clarity (00:14:34)
Discussion on the importance of federal government leadership and clarity in shaping the future of the cannabis industry, particularly regarding rescheduling and integration with state markets.
Financial impact of rescheduling and industry relief (00:23:12)
Estimation of the potential financial relief and inflow of capital into the cannabis industry following rescheduling, including discussions on banking and lending challenges.
The challenges of financing in the cannabis industry (00:24:42)
Discussion about the difficulties faced by landlords in the cannabis industry due to financing and regulatory constraints.
The impact of regulatory changes on financing (00:25:50)
Exploration of the potential effects of regulatory shifts on financing and the challenges faced due to lack of availability.
Opportunities in the hemp industry (00:29:35)
A broad overview of the hemp industry, including potential opportunities in the cannabinoid-based market and consumer products.
Uncertainties surrounding the federal farm bill (00:34:46)
Discussion of the lack of clarity in federal and state farm bills regarding hemp cultivation, distribution, and processing.
Addressing the challenges of the black market (00:43:20)
Exploration of the impact of the thriving black market on the regulated cannabis industry and the need for federal and state governments to work together to address it.
Excitement about the entrepreneurial experience in the cannabis industry (00:48:06)
Reflection on the positive aspects of the entrepreneurial journey in the cannabis industry and the overall optimism about the industry's future.
The industry's growth (00:48:39)
Discusses the significant growth and shifts in the cannabis industry, including rescheduling, market changes, and consensus.
Excitement about future opportunities (00:50:01)
Highlights excitement about opportunities in drug discovery, harm reduction, global legalization, and potential market growth.
Potential market impact (00:51:02)
Discusses the potential market cap and opportunities once national exchanges allow listing for THC-related companies.
Policy and industry collaboration (00:52:32)
Emphasizes the need for industry collaboration, pooling capital, and applying pressure to affect policy and create self-regulatory organizations.
Connecting with the guest (00:54:09)
Provides contact information for the guest and mentions future media presence and upcoming events.
Supporting each other (00:55:44)
Emphasizes the importance of helping and supporting each other in the industry.
Intro (00:00:00) - Welcome to the Cannabis Success Show. If you're a cannabis company owner or operator who's ready to scale your business, grow your profits and plant the seeds to take your business to new heights. This show is for you. We'll share expert insights, industry trends, and actionable strategies to help you blaze a trail of success in the cannabis industry.
Guillermo (00:00:25) - Welcome to the Cannabis Success Show. Today we'll be talking about we'll really get into the future of hemp and how the reschedule will play out. Leslie's got a lot to offer, but before we jump into that, we're joined by Leslie. Box score. He is chairman of the board for Indoor Harvest Corp. Leslie, thanks for coming on the show.
Leslie (00:00:48) - It's really a great to have a conversation with you. I think that the approach you take and the questions that you bring are valuable and need to be discussed. So, this is really a pleasure for me.
Guillermo (00:01:01) - Absolutely. So, before we jump in, I always like to get into, your story. You know, how you got into the cannabis hemp world and what was really your trajectory into where you are today?
Leslie (00:01:14) - Well, you know, I had first used cannabis when I was younger.
Leslie (00:01:20) - It was, you know, school bus stop. And my friends convinced me to do it before high school when I was 15. It had been always something that I actually enjoyed tremendously, and I found a lot of value in as I got older, when I was working in the capital markets, I stopped using it entirely. I was one of those people that didn't drink, didn't smoke, etc. although I always knew the prohibition was based upon lies and disinformation won and was some of the worst, policy that had been implemented in the United States ever. And so, I always paid attention to it. I didn't, it. As an industry. It had missed my attention because I had just assumed that there would never be a correction of the catastrophic policy that we saw. And I was really, awoken when I came out to the West Coast to do some research on the casino industry. My background is in corporate finance and investment banking. I was one of the first, corporate finance professionals to look at the internet and new media back in the mid to late 90s.
Leslie (00:02:30) - That gave me the perspective of understanding what happens when an industry is born and what the different, paths, trajectories and effects are on a brand new industry that disrupts how we live and do business in some massive and global way. And so I, I had always had the perspective of looking at, at business and industry that way and looking for those types of opportunities. I was looking into the online casino industry. Of course, if you're looking into gambling in any fashion, the place you go is Vegas. I was a native New Yorker at the time. I'd been born and raised there, and my wife and I came out to Vegas in oh eight and oh nine to do some research on the casino industry. And when I got here as a New Yorker, I was surprised when I went to the West Coast, when I went to San Francisco in Los Angeles, and I saw that friends of mine were going to dispensaries, which was a new thing for me at that point. And they were going they had medical marijuana recommendations, and they were going to purchase products, and they were calling things, you know, flour and extracts and they were talking about vaporizers.
Leslie (00:03:45) - And, and this was all still, you know, coming from New York when people bought weed, they went and went and got a bag of weed. It was, you know, maybe it was weed that didn't have any seeds in it, or it was a pot that had seeds in it. If it wasn't as good, it wasn't as a market. California had developed it so far already in 2008 and 9 in 2010. When I moved to Las Vegas, I ended up going out to the Singularity Institute for Artificial Intelligence Summit in San Francisco. I was invited to participate in that, and when I was there, I got to get a much closer perspective on what was happening with dispensaries. I was, looking at it from the outside in and a visit with something that was in my future, and I just was talking to people about it. And I also looked at what was going on online in the in Silk Road. Somebody said, you should see what's going on there because it's, you know, it's also there's something happening there too.
Leslie (00:04:46) - And I looked at all of these things, both legal and illegal markets. And I was floored. And I came back to Nevada and I started doing research. This is April, May of 2010, and I started looking into how big is the black market in the United States. And it turned out that at that time, the black market, according to the United Nations and Rand Corp., was 42 to $50 billion a year. Whereas comparing it to the professional sports in America, the NBA, the NFL, Major League Baseball and the NHL all combined were less than 30 billion a year. And so I always like to say weed was bigger than sports in America. And that was really sort of mind blowing in terms of understanding how big the black market was, because that pointed to how big an opportunity there was. And so when 2012 came around and adult use got legalized in Colorado and Washington and failed in Oregon, a dear friend who is a political operative and has been the most, accurate predictor of what's going to happen in this industry as long as I've known him.
Leslie (00:05:56) - Joe Breznik, he said to me, this is the beginning we're going to see. This is the moment when it's going to turn for the whole country. And I believed him and he and I started working together. I started getting very involved in the policy side. And, the rest, as they say, is history. It was a complete life change in terms of focusing exclusively on hemp and cannabis and what was going to happen, and also focusing on the policy side to always do what I could on a pro bono basis, to work with policy makers so that they could get the best information so they can make the best decisions about what policies to put into place. In short, it was really driven by my investment banking and corporate finance sensibilities that I said there was an opportunity here with cannabis and hemp that I thought was going to be equivalent, if not in some ways eclipsed the opportunity that I had with the internet new media back in the mid to late 90s. In terms of there being a.
Leslie (00:06:56) - Global disruption and change in how we live and do business in some in some way as regards cannabis and hemp.
Guillermo (00:07:04) - So being an investment banker, I mean, you look at the you look at the details and you not only are you a person that, you know, looks into the future, but given your background, you also, I'm sure, do it on a very detailed level, modeling what the future could look like for a business. That's what investment banking is all about, right. And when you when you first got into this, did you, model in or what was your expectation on when companies would be unburdened by 280? Because I would say if you if you work all that out, you're like, I have to make extremely high margins and scale up to be able to, to make cash after profit. And that's not something that, you know, we could do for ten years on end. So, when you started this, what did you think, would happen and how you were looking at your numbers and when you would be able to, to generate cash flow, because right now you're talking where you started was more in the regulated space.
Guillermo (00:08:10) - And what I mean by that is, you know, a state license operate under the state, whereas now you're in the hemp. So maybe we'll get in the hemp. But let's start with the regulated side and what you thought at that time.
Leslie (00:08:20) - Okay. So a couple of the by the way, your, your methodology of looking at the question is really terrific. And I like how you how you point out the changes that are taking place. So, let's, let's give you an answer. So, I. First was looking at adult use, and I was imagining that 280 and federal policy would change, by 2020 or 2022. Really. And as you can see it. Here we are in 2024. And it really hasn't changed yet. The effect on the businesses it 280 has a couple of effects, and one of the big ones that people really have not spoken about, what they talk about is the burden, right? There's a huge burden from 280 tax burden that is just making it a business that should be profitable, much harder to be profitable because so much of your, your, your, revenue ends up being, tax burden.
Leslie (00:09:27) - There's a side to that as well that also puts pressure on the industry, the regulated industry, and makes it hard to, succeed. There's like there are three real effects effect one, you have this huge burden effect to it. The black market has an advantage that they're not dealing with that. So now there's a price pressure that comes from the black market. People have not been speaking about. And the third one that no one talks about is Native American operators. They have no. Not only do they not have a 280 burden, they have no federal tax burden whatsoever. So, when you have a regulated Native American operator, when you have somebody like the Las Vegas Paiute Tribe with New Woo, they are not only able to operate without the burden of regulation, they're able to operate without the burden of 280 and federal income tax. So their, margins are extraordinary and they can compete on a price basis. It's almost, you know, it's how do you compete with that somebody that has a 40% difference or more in the margins that they can charge.
Leslie (00:10:50) - So there were three different areas that I really saw. One, it is it makes it difficult to, to be in the business at all. It's just this incredible burden to the black market is a competitor. And then three, the Native American operators, which there are more of them every day that are getting into the industry, have an advantage. That is extraordinary. And so, the effect of, the delay in federal policy correction has been extraordinary on the industry and has provided a lot of stress. One of the things I'd also like to say that is often, Missed is when people, because people assume that the industry is going to be highly profitable. And it can be and it should be. And why isn't it? Why is it that profits are so hard to find? Why are so many operators suffering so greatly? Why have so many operators in a business where they should be just doing unbelievably well? Why are they losing money and finding pressure and being forced to consolidate or exit the industry? I just saw someone here in Vegas giving away what was over a million and a half dollars worth of greenhouse, giving it away.
Leslie (00:12:13) - There was they couldn't sell it. There were no buyers. And they were literally saying, come get it, it's yours. And it wasn't bad equipment. It was extraordinarily good equipment that hadn't even been used for that many years. And so why is that happening? There's another reason beyond the tax burden, and that is the federal illegality causes an issue with liquidity overall in the industry. You're you the lack of lending in any form, the lack of real estate financing, if you have a THC business, it the lack of equipment lease financing, the lack of floor planning, financing, all of these things that are that are essentially thought of as automatic in other businesses. If you have a car dealership, you don't pay for the inventory, you don't pay for the fixtures. All of that is provided through financing. If you have a restaurant, you don't pay for the equipment to be put in. It's leased when if you're doing manufacturing in other areas of pharmaceutical manufacturing, all of that equipment and, and the infrastructure is provided to you through financing there.
Leslie (00:13:19) - And the challenge to find financing is extremely hard in the costs associated with it are much higher. So, you have a slower velocity of capital, you have less liquidity, and you have much higher costs of capital. When you combine that with the tax burdens, the competition, etc., what you have is what should be one of the most profitable industries in the United States is actually an industry that suffers, and it suffers again because of the inaction of the federal government and the position. The federal government is putting the regulated markets in by being so slow in changing to adapt to the demands of the American people. 70% of the United States wants adult use and believes that it should be adult use. At this point, and the fact that the federal government continues to go slow is just a reflection of what my dear friend who I mentioned earlier, Joe Bresnan, used to say, and that is, you can always count on a politician to do the right thing. Once you've removed every other choice, and we have been slow in removing choices to make sure that we get the right policy environment.
Leslie (00:14:34) - And that policy environment has all the effects that I described and causes the problems that that your question sort of pointed to in the beginning.
Guillermo (00:14:45) - Yeah. Like you said, I've heard the stat is 90% of, you know, Americans agree on the medical use. It's lower for wreck. Right. And that has got to be a kind of speaking to what's the probability of the reschedule getting done. It's got to get done before the election. But it's also very much driven by the amount of people that that agree on the issue. And that's very rare for 90% of Americans to agree on anything. And I heard someone say this morning I was listening to another podcast on the reschedule that, I mean, this is higher than if you hand it out $100 bills, not nine and 10% people would take them. So it's a IT people are really leading towards this. And so politically just makes a lot of sense. I think it's all on the timeline that that we had predicted, for the election.
Guillermo (00:15:42) - But going back to one of your points on, on the three on the three is that you mentioned liquidity is a big a big reason that cannabis companies aren't profitable. The other one is because I think it leads to lack of scaling too, right? Like here in Texas, we're talking a lot about this is where I think I've heard the most talk of the industrial hemp side, and we'll go into that side of things. But in order for that to work, scale is really, really important. And, we're very far behind. And, you know, I think we say, like, we're 100 years behind the concrete industry. And so it takes many, many years, to get there. And I've heard, like, I talked to my brother in law talks about this all the time. He's a farmer in West Texas, and he tells me, stories of how much, equipment he buys from hemp farmers, that at a discount and those kind of things. So, it's happening all across.
Guillermo (00:16:45) - I'd like to get into ask a question on which you mentioned about Native Americans, because this is such a great point that I have I have not thought about this and how the reschedule. Are you saying this this would negatively impact Native Americans, in their businesses, correct?
Leslie (00:17:04) - It could, depending upon federal government policy positions. Now, if the federal government approaches this from the perspective of saying, yes, we're rescheduling to three and we're going to continue to look at how the federal government and the state governments are going to integrate in our policy position. Well, that, you know, that's a positive. If the federal government reschedules to three and then tries to. And force this to say that. Everyone now needs to find their way to a DEA license. As a pharmaceutical, whether or at worst an over-the-counter product that it needs to register with the National Institute of Health and the FDA and the DEA as an over-the-counter product like Tylenol. All of a sudden, we are in a very precarious position where this massive industry that has been built in so many states, which is, you know, 30, 40 billion a year, is now going to face.
Leslie (00:18:19) - What could be a complete devastation. And so I imagine the federal government is, is uninterested in killing jobs, because that would lead to the loss of thousands and tens of thousands of jobs. The economic impact would be catastrophic. It would be very bad for economies around the country. And so I imagine they will avoid that. The lack of clarity around what they're going to do is really the issue. We need leadership. We need leadership from the Department of Justice. We need leadership at the FDA and in the executive branch. And someone needs to say, this is what's going to happen, and this is how it's going to proceed. Again, the reason why we have yet to see that is because. If we have if we have been, if we are still waiting to be able to remove the choices from our elected officials and present them with only one path, that's really the issue. And we have as a industry and as a as voting blocs, we have put we have we need to put more pressure on the elected officials to do what's correct and to find a path for adult use to be de scheduled and for medical use.
Leslie (00:19:49) - The schedule three to have a path for people to develop medicines and therapies based upon it that are through the traditional mechanisms, we need to be able to have both operate at the same time, and we're going to need leadership from the federal government to do that. We are still waiting for it. And so, the real issue is that we know changes coming. We know 280 is going to go away. We know that banking will be easier to get. We know that the capital markets will be accessible because the main reason you don't see THC businesses trading on the New York Stock Exchange and the Nasdaq and the American Stock Exchange is because the THC business is still federally illegal when it goes off of schedule, and not just federally legal, that it's at the highest level when it goes off of schedule one, and there's a path in through that. That schedule three allows the capital markets to say, you know, we'll allow publicly traded companies that are THC based businesses to trade. That will also provide a tremendous amount of liquidity to the industry and capital to the industry.
Leslie (00:20:55) - And I think those changes are coming. The issue that we have, as I, you know, I'll reiterate, is a lack of clarity around the federal government's position as regards how schedule three and the existing state markets are going to integrate. One of the people I would suggest that you try to get speak to is my friend Barry Grissom. Barry Grissom was the U.S. attorney from U.S. attorney from Kansas during, Eric Holder's tenure as attorney general. And when Deputy Attorney General James Cole brought all the U.S. attorneys together when Colorado and Washington had made adult use legal, and they asked for the US attorneys to talk about, you know, in their committees, they were talking about how should the Department of Justice approaches. That was very Grissom who really drove the conversation and actually produced a lot of the fundamental work that ended up becoming the basis of the Cole memo, which to date, is still the single piece of federal policy that has the greatest clarity on the federal government's position. And I would suggest that at some point, if you could get him on here to talk about these specific issues, he is brilliant.
Leslie (00:22:04) - He is, forward thinking. And he has made a tremendous difference in what he has done as one of the leading law enforcement officials to ever get involved in looking at policy and how it should change.
Guillermo (00:22:20) - Yeah. And, speaking. So going back to policy, I think a lot of people, there's a misunderstanding that that the reschedule, automatically it doesn't automatically push in, you know, safer banking. there's a lot of things that it doesn't do. Right. And I know we talk a lot about there's the impact of 280, the dollars that that would generate in the current year. And the next year, there's the amended returns and the amount of cash that that is bringing back in the industry. How much do you what do you think in terms of a dollar value and, timing on the inflow of dollars in the industry from. The reschedule in what would follow on after that.
Leslie (00:23:12) - So the relief. The relief that would be provided through a change in 280 that would be able to be chartered by these businesses would be $10 billion or more.
Leslie (00:23:32) - I think by the time we're, you know, we've looked at it to the industry around the country, and it really represents a substantially larger number. You know, at some point the. The issue around capital is going to be affected in a number of areas, and we are still looking for clarity. One 280. Secondly, will there be lending? Will banks now say, you know what, we'll start giving business loans to the industry. We'll start. So. The way it actually lands in terms of banks and providing capital and the effect on liquidity and funding happens like this. If you were an entrepreneur in the industry and you came to me and I had real estate, you said, Leslie, can I rent this warehouse from you to put it growing? Sure. We've come up with a we come up with a lease, I rent it to you. You pay your lease. It's probably going to be above market somewhat because you're in the cannabis industry and, you know, as such I can demand a premium.
Leslie (00:24:42) - And so what happens is as the lessor, as the person, the landlord, if I have that property. Financed even a small amount. Somebody carrying paper on it. Maybe I have it. You know, 20% of the value has been I've gotten some liquidity through my account at, at Merrill and I have other real estate there. As soon as Merrill discovers that I have rented directly to somebody in the teach C business, they'll threaten to pull my account. This happens all the time, and the reason they do that it is, is reasonable, because their charter says they can provide capital to any criminal enterprises. And technically speaking, on the federal basis, this is a criminal enterprise. And so they'll tell me, Leslie, you got to get rid of that tenant, or we're going to bounce your entire account and you're going to have to you have to pay the money necessary to reduce your debt to zero. We'll sell out your other positions if we have to, to do it ourselves. And we're going to close your account and send you a check.
Leslie (00:25:50) - And that happens. And so the way that so what does that do that means that you then I call, you say I gotta kick you out. You can't do it. You got to either buy the building for me or get out within 30 days. And now how are you supposed to deal with that? You put all your equipment in there. You. You spend $200 a square foot on capital improvements, on CapEx. And so, you know, what are you going to do? As the operator, you're completely in a terrible position. So, you go out and you talk to family offices and other sources of capital, and they know that they've got you in a very compromised
Guillermo (00:26:24) - Super expensive. Yeah.
Leslie (00:26:25) - So cost an enormous amount. And so that is one of the main ways this lends. And so the regulatory environment shifting will help that. And so we need to see is that going to happen. We currently again are waiting the equipment lease financing same thing. So instead of spending $200 a foot on CapEx, you go borrow $200 a foot on, on, on financing to do the CapEx.
Leslie (00:26:52) - That's currently also a challenge. The lack of availability is an issue that you need to deal with, and you again, need to pay more for the money. And so all of these things are going to need to be answered when the rescheduling language is finalized. The federal government said, we're done. We are doing it. It's 100% commitment as far as we can tell from the messaging last week. What will that mean? We're still waiting to find out. And so, it is again a huge open area. And it is really terrible to the business people that need to operate in it because it is just unfair and it's bad for communities, it's bad for America, it's bad for business. It's bad for tax revenue. It's bad for job creation. It's bad for wealth creation. These are all challenges that need to be addressed. And unfortunately, our government is just moving so slow. And the only thing we can do is try to find a way to apply pressure. And that's one of the main things that I actually look at and how that can be done.
Guillermo (00:27:55) - Yeah. So even if all this passes, you have, safer banking eventually. It's a source subject. There is still a delay in the capital because not all banks will get in. Right. That's another thing to think through. Not all banks will get an even if the federal charter allows for it. And the other piece that could be a bump to that is, is the branded credit cards coming into the space as well. But that may not happen overnight. Even if it's even if, say, for banking passes. So, all this could take some time. But we see some very positive things that as you mentioned, the reschedule, everything points to, you know, the latest tweets from Biden and, and Harris. I mean, you see it as it's really being used, as a centerpiece for the election. The comment period was shortened at that. All points to the timing being in August and everything getting kind of, orchestrated to a couple of months leading up until November.
Guillermo (00:29:00) - So all that is, is very positive. but like I said, there's some, some delay in getting these funds back into the industry. I'd like to switch gears and talk more about, indoor harvest so we can get into a discussion. More on the on the hemp side and how all this will affect hemp businesses that operate under the farm bill. And maybe what's coming up for the 2023, farm bill. So, can you talk about indoor harvest in terms of your business model, what markets you're in?
Leslie (00:29:35) - Sure, sure. I know I.
Leslie (00:29:37) - Can speak about it on a meta level. I need to avoid anything that would be considered material, nonpublic information, and we need to make sure all disclosures are in line with SEC guidance and so and compliance. And that being said, we see the hemp industry. We see the farm bill. Of 2024 actually is one of the most important pieces of legislation because of how it's going to affect the hemp industry. We see a number of opportunities there that we like a great deal.
Leslie (00:30:04) - We see the cannabinoid based market and the many other cannabinoids CBN, CBG, CBD, THC and others that occur and many, many others, hundreds of other of cannabinoids are being looked at into the effect that they have on the human body from a therapeutic perspective, and how supplements and nutraceuticals can be created that may have some positive effect, and people may enjoy taking. And so, we look at those and the different ways they can be delivered, you know, be delivered, whether it's through topicals, whether it's through injectables, whether it's through smoking, hemp, cigarettes. we see those markets as very exciting. We also see, there's another market that I, I, I must avoid speaking about, but I will say that there is another market that the, the DEA commented on that is, from a regulatory perspective, easy to navigate in the industry and presents extraordinary profit and growth opportunities moving forward. And we've been spending a lot of time crossing our T's, dotting our eyes and making sure that we're prepared for it.
Leslie (00:31:16) - We like the hemp market for consumer products. I mean, we're just incredibly bullish on that. And we're looking at the farm bill and the changes that that's going to make and how it's going to allow for growth in that industry. And we're excited about it. and so, moving forward, those, you know, as regards indoor harvest and the public markets, that's something I've been interested in since I first got into the industry. And that was how the public markets at some point will be the best place to go to get access to capital, to create and grow and acquire businesses in this industry. And I am more bullish on it today than I've ever been. And I'm also excited about the recent discussions we've been seeing around tokenization and the capital markets and the public markets. Larry Fink, who had been previously extremely negative on blockchain, fintech and anything related to tokens, has now become very bullish. He has, in addition to being one of the largest, if not the largest holder of Bitcoin in the world through Blackrock.
Leslie (00:32:31) - He also has been speaking and in saying something I've been saying for a while, and that tokenization of the capital markets is coming. And so, we are looking at all of these different changes and how the capital markets are going to be able to provide opportunity for us in the hemp industry. And we're extremely excited about all of the opportunities through media, through content creation, though, distribution, through the different categories of products that are, that exist and the ones that we haven't even seen get launched yet. And we're where we've been doing our homework and we've been nose down and really finding the ones that we think present the best opportunity for our shareholders moving forward so we can deliver some real value to them. And we thereby have an opportunity to really create a very robust, growing, fast growing business. And the hemp industry is a one of the things that we look at as providing tremendous opportunity.
Guillermo (00:33:34) - I'll have a follow up on tokenization, because I think many will want to know what that really is.
Guillermo (00:33:39) - But going back to the beginning, you mentioned the changes that are coming up in the farm bill, for those who aren't as familiar, can you, break down what the federal farm bill allowed and then how the state's individual farm bills interact with that, for example? I think in Texas, there's so much a lack of clarity in terms of what the federal what the State Farm bill allows for and what the future is for, intoxicating, hemp products, for example, you know, there was a hemp band that is, that was held up in Texas, but yet, you see smokable hemp in Texas. you can you can go into store and buy flower. So, it's really a is it a matter of enforcement? So really, when, when states pass a farm bill, is that for the, for the overall production of hemp? Is that does it allow for manufacturing, retail and cultivation or is it just unclear? We're all kind of operating in this, in this gray area.
Leslie (00:34:46) - So. The second part of your question is unfortunately, sadly, the truth.
Leslie (00:34:55) - And that is that even though the farm bill creates an opportunity. Pre-existing farm Bill 2018 said businesses that grow hemp as long as it tests less than 0.3% THC by gross weight. It's legal. It's considered how it can be grown. It can be shipped across state lines. It can be it can be treated like any other crop above 0.3%. And it's considered marijuana. It's illegal on a federal basis. There are a number of areas where there is tremendous lack of clarity. Did they mean t h delta nine tetrahydrocannabinol? Or does it mean delta nine tetrahydrocannabinol acid? Because technically speaking, what actually appears in the plant is not a euphoric. And you use the term intoxicating. You're going to hear me use the term euphoric only because intoxicating. I like to always point out that alcohol is an intoxicant. Toxic. It's a poison. Whereas delta nine tetrahydrocannabinol is actually is not toxic. And so it's a euphoric. And we and as it regards that being a euphoric, what we what we like to point out is that the euphoric only becomes active through deep d carboxylate ion.
Leslie (00:36:30) - And I'm sure I need to work on my pronunciation of that d carb, so.
Guillermo (00:36:37) - I don't blame me for not getting it on the first one.
Leslie (00:36:41) - So when you'd carb it, then it becomes an intoxicant. So, or a euphoric. So, the question is so one will the farm bill provide clarity on onto what is it that's actually illegal federally. When is it the d carb version or the or the acid that's not declared? Because if it's not the acid, well then technically speaking, technically speaking, you can grow hemp that is 20%, with the acid, because that's not the compound that is actually being regulated. And so, we need to so that one, there's what we need to see if there's going to be clarity on that too. The original farm bill was 0.3%. This one, they're looking at 1%. And the interesting thing about that is there are many new users who, if they smoke a cigarette that's 1% THC, they'll feel a euphoric effect. It'll be mild.
Leslie (00:37:38) - It will be a euphoric effect that's much more similar to what marijuana and cannabis were like 50 years ago. It was common for weed to be sold. That was 3% and 5% or 2% THC, and it was still considered pot. And people bought it and they smoked it to get an effect. And so that that is another area that's going to be interesting to, to sort of review. And then the in terms of the state of Texas and other states, the way I understand how the farm bill works is the farm bill previously had a carve out that said, if your state Department of Agriculture drafted its own rules around hemp cultivation, distribution, processing, etc., then it needs to send them to the federal government, and then they become the law of the land for your state. Absent that, the rules in the farm bill will become what the law of the land is. And now let's go back to the gray area. This is a sad, sad state of affairs we're in, and it's just the way it is.
Leslie (00:38:47) - Because when you process the plant. To try to isolate the different cannabinoids, even if all you're trying to do is get to the CBD or the turbines when you process it by weight, the THC level in the, mother. Extract ends up going up to much, far above 0.3%. So technically speaking, if your processing at any point leads to your one of the compounds being greater than 0.3% THC, your whole supply chain has now been compromised and technically speaking is illegal under the farm bill. And so, any product that is unprocessed, like hemp cigarettes, can be distributed freely anywhere because it never breaks that rule. Whereas if you do process it, technically speaking, it, it is now in a gray area at best and, and has crossed into a, regulated, you know, a regulated. No, no at worst. And so it is a big challenge. Again, the and that goes back to federal policy on THC and the lack of clarity. Our federal government must create greater clarity, and they have to start doing a really good job.
Leslie (00:40:14) - And they need to reach out to us in the industry or accept our help, which we're offering all the time to the federal policymakers. They need to accept the help we offer in terms of information and how to navigate this, because they currently exhibit a tremendous lack of understanding, and that lack of understanding leads to a lack of clarity in the policy that they implement. Lack of clarity in the policy leads to a very difficult environment to navigate from a business perspective, and so we need to see that change.
Guillermo (00:40:47) - I, there's so much in our language that we don't even realize, as you said, euphoric versus, you know, using the term euphoric versus intoxicating. Of course, I use intoxicating because that's how it's described in the news. But you're absolutely right. It is. It is not a toxic substance to the human body. It's naturally made. But this is one of the ways that we can work, to destigmatize, to change, the last, 100 years or so and how we've been programmed because, these are just very minor things that we could start to change in, in our language.
Guillermo (00:41:23) - And I know that that I will, as I go forward, just from our conversation here, I I'll, I'll use the term, euphoric, you know, and it's just much it's much more accurate. And there's so much in our language that really contributes to it to where we are today without us really even knowing about it.
Leslie (00:41:44) - You could you couldn't be more. Right. And let me let me say this. My friend Rick Cusack, who was the associate editor of High Times for many, many years, he is, by the way, he, you know, shout out to Rick, without him, we would not be where we are. He's an amazing man. He has done incredible work. And he had a term he used to call the artifacts of prohibition. And so, we need to put as many of these and intoxicating. That's one of them. We need to put these in the rearview mirror as much as possible. And I want to say something else that that we didn't cover that I think is really critical.
Leslie (00:42:20) - And that is I have a friend who is an operator in California. He's he has easily one of the best operations in the entire country, vertical companies. I mean, he runs his business extraordinarily well. If you look at his operation, you'll see that they operate like, you know, it could be a pharma manufacturing facility and probably better than many of them. And so, Todd Kaplan, Vertical Company's big shout out to you in the work that you do, he, he points something out that I think is incredibly important. The California market is a 5 billion a year, something like that. He says that the black market there is seven acts, that it's 30 to 35 billion a year just in California. Now, keep in mind, the total black market in the United States in 2010 was 50 billion. I believe the black market in the United States is larger than it's ever been. It might be 50% greater than that or more. And that's the biggest problem we have.
Leslie (00:43:20) - The black-market thriving is hurting the regulated market, because people are still buying from black market operators, because they don't have to deal with licensing taxes, etc. And the and the punishment and the risk has been reduced as legalization has moved forward. And as a result, we have so many black market operators who are so brazen in what they're doing. I mean, look, there were thousands of dispensaries in New York City that were completely illegal operating for months. And this, again, is the federal government and the state governments having a such an incredible challenge in working together. Why was alcohol shut down after prohibition dropped and black market bootleggers were shut down because the federal government worked with the state governments to go shut down the black market, which was in the interest of all the regulated operators. We have not we have yet to see that happen here in the cannabis and hemp industry. And we need it. We need the black market to be dealt with so that our regulated market can finally operate in a real environment that is going to present, you know, a reward to all the people.
Leslie (00:44:35) - What works so hard to build their businesses here, to be compliant, to collect taxes, to take care of all their licensing, etc.. With all the challenges that you and I discussed, discussed today capital, access to capital, liquidity, banking, etc. we need to see these people who have been working so hard to build these businesses finally get a little bit of relief, and I am hopeful. at best, I'm cautiously optimistic that the schedule three will do some of that. Although I have to say, again, my concern with the black market and the size of it is very substantial.
Guillermo (00:45:13) - Yeah, I think it goes back to earlier your comment. It's about educating federal and local policymakers because it has been and still is very short term in how taxing jurisdictions are seeing it, how the federal government sees it, because it benefits everyone to have a growing, legal market. In the long term, there'll be more tax dollars at the local, state and federal level. just because I mean, just doing the simple math, I mean, coming from the investment banking side and, you know, accountants and I think we're in a good position to share the numbers, to tell the story, to make very compelling arguments of how reducing this heavy burden of taxation, whether it's from excise tax or obviously to aid, is really going to help bring in more dollars in the long term because it will create a substantially large, regulated industry.
Guillermo (00:46:14) - Like you mentioned, there is a large opportunity, for growth there if we bring in, consumers that are that are shopping in the black market, and there's examples after examples like, Missouri, right now, they just recently challenged the stacking of sales taxes by, different taxing jurisdiction and thought that would be a simple one. But, that was ruled down. And so now you have extremely high, excise taxes that consumers are having to pay and therefore eventually go to the, to the black market. But I think your point, I think a way around it is the cannabinoid, the, the education, the minor cannabinoids because those consumers are really focused on, on quality specific effects. And these are just things that you that you can get, you can't get in the black market. So regardless of what happens, I mean, I think that's a great strategy is, is going after those consumers because they are not as affected by price. And some of these things that that the regulated market deals with.
Guillermo (00:47:20) - I'm an example that I use like CBN and CBG and it's just like you mentioned earlier, like not everybody wants a euphoric product and there's a large consumer base that is untapped. And that is a great opportunity, for growth there. So Leslie, we're coming up, to the end of, of a show. I always just like to end on. What are what are you most excited about? in the coming year and the next coming years, you obviously have. You look at a lot of opportunity. We've touched on that. But if you had to just mention the, the top three things that you're most excited about for the upcoming year, what would that be?
Leslie (00:48:06) - So one of the things I'm very excited about is, just I love the entrepreneurial experience and I always have. And to see projects at the early stage become operating businesses and then begin to grow and really thrive and flourish, that really is, is exciting to me. And I see that even though we're dealing with these, these issues, and I talk about so many of the challenges, I want to make it clear we're in the best shape we've ever been as an industry.
Leslie (00:48:39) - And this industry is poised for incredibly muscular growth, and we're going to see that coming in the next couple of years. It has been delayed. and we're seeing some shifts. And I think we're going to continue to see we're seeing substantial shifts with the rescheduling to three and the discussion that's creating, we're seeing substantial shifts in markets like Florida also looking to create adult use markets. We're seeing substantial shifts in the overall, as you pointed out, what other issue do 90% of Americans agree on? I mean, there might not there might not be any of the they might it might be that this is the highest, the most the great, the greatest consensus on anything we can achieve. We probably can't even achieve consensus on if Americans can achieve consensus on something. Went on, but they do it on this. And so the areas I'm excited about, I'm excited about the farm bill and the changes that that's going to create, any opportunities that creates around hemp cigarettes, around nutraceutical supplements and minor cannabinoids, as well as full spectrum products that will be with minor cannabinoids, feature with minor cannabinoids, and we'll have other cannabinoids and terrapins associated with them.
Leslie (00:50:01) - I'm excited about the change in narrative for drug discovery that's going to take place at the FDA, and how much harm reduction we're going to see as therapies based upon the compounds found in this plant are begin to begin to be developed, and much more research gets done. I'm very excited about the rest of the world gradually heading in the right direction. Germany that's going to be, you know, lead to a bunch of dominoes falling in Europe. Because if Germany has a legal market, all of its neighbors are going to say, wait a minute, we don't want our citizens to drive to Germany and give Germany revenue and then drive back. And so we deal with the issue of them having the product without ever getting any of the benefits. You're going to see other nations begin to, to legalize. And I think that's going to be an incredibly positive thing. And then I am I remain cautiously optimistic about the national markets here in the United States, allowing businesses that are THC businesses to trade publicly once we see the language on schedule three finalized.
Leslie (00:51:02) - And if we do see that all bets are off, I mean in meaning the opportunity will be beyond anything we could even anyone is really anticipating in 2000, in the year. I guess it was 1999. The total value of all publicly traded internet companies was under half $1 billion in 2000. Just five. Just I'm sorry, 95, 95, not 99. Just five years later, the total value of just the top 280 publicly traded companies was something like $3 trillion. And that was in year $2,000. You could easily see Seth Tan, another dear friend. Shout out to Seth. You can easily he he's got it right. He says you could easily see $10 trillion in market cap public companies in the hemp and cannabis industry. Once we see the national exchanges allow listing for companies that touch THC and so that that is going to be create so much opportunity again and liquidity. And I'm really going to say to those operators that get access to that capital in the future were take part of your money and put it to policy and creating self-regulatory organizations for the entire industry that will work with the federal government to change policy to reflect what really needs to happen.
Leslie (00:52:32) - And so, and the only way, again, the only way we make that happen is by removing choices for the policymakers, and we make it so their only choice is to do what is right for the citizens and the industry. And that only comes about from the industry working together, pooling capital and then applying pressure together with one voice. If you have 50 voices, all lobbying for their own thing, nothing ever gets done. If you can effectively create single voices that are funded with good, with good, with really, you know, great people like Joe Breslin and other others working to affect policy, then you can see a real change that makes a difference. And that's what we really need.
Guillermo (00:53:15) - Yeah. Thanks for sharing that. Leslie, I think, you know, for those who've been involved in the industry since the beginning of the very first rec program, such as yourself, I'm sure it's easy to, get jaded on all the things that haven't happened, but it's undeniable that this year is, a lot of great things are happening that you just mentioned.
Guillermo (00:53:35) - And, it may very well be the longest, for those who have been in as long as you have the longest positioning, ever. Right. And for what's going to happen. So those who've been in so long are very well positioned to now take advantage of some of the great things that are that are going to happen in the coming year. So, so lastly, Leslie, where can people find you that, want to reach out with you, work with you? I know many want to, reach out to you, have you on a podcast, all kinds of different things. What's the best way to find you?
Leslie (00:54:09) - The best way is, you know, you can find me an indoor harvest. Leslie. Leslie. Dot. Box score. Box score at indoor harvest.com. You can find us at the indoor harvest website. You can find me at the Electron Partners website. You can find me on Twitter. Leslie, box score on Twitter. You can find me on LinkedIn. Leslie. Box score.
Leslie (00:54:30) - And so all of those are great ways. Look for some additional media, to be coming out. We're looking at creating some repeating media presence through social media. So that may be happening as well. I love to be contacted by people I, you know, sometimes I get too many emails to respond to everything and things fall through the cracks. But be persistent, keep at it and you'll get Ahold of me and I'll I almost always respond, and I really love interacting with people. I'm looking forward to what the next year presents. I, you know, another shout out to I see you're wearing the MJ unpacked shirt and a big shout out to George and his team, what they're doing there. And I think events like that are going to continue to help as well. And, and I and I look forward to seeing people at some of those events this year. Champs is coming up here in Vegas. That's going to be a tremendous tradeshow. I really recommend attending it in July if you can.
Leslie (00:55:21) - We'll be there. And so you can find me at some of these conferences. You can find me online. And if, if you ever need anything, if I can introduce you to anybody, if you know whether it's Barry or Joe Brezhnev or any other number of Todd Kaplan from the vertical companies, if any of these people would be beneficial for you to get on the air, just let me know. I'm happy to help in whatever way I can. I'm really here just to support the team.
Guillermo (00:55:44) - Absolutely. We're that's a great, great way to end is that we're all here to help each other and lift each other up. And it's all about, building those relationships. So, Leslie, thank you again for your time. I think our listeners are really going to benefit from this episode. And thanks. Thank you all who, tuned in to listen today and that that's all our time for today. Thank you for joining us on the Cannabis Success Show.
Leslie (00:56:09) - Really a pleasure. Thank you so much for having me on.
Leslie (00:56:12) - I really enjoyed the conversation.
Outro (00:56:14) - Enjoy this podcast. Visit our website Anders cpa.com/virtual CFO cannabis to get more tips and strategy for achieving business success in the cannabis industry.