2014 Highlights From Two Cannabis Industry Insiders

Alan Brochstein and Jay Czarkowski

Alan Brochstein, an expert on cannabis stocks and Jay Czarkowski a dispensary owner turned consultant highlight all the pivotal events that took place in 2014 for the cannabis industry.

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Topics covered:

– The states that legalized in November

– The wild roller coaster year for cannabis stocks

– The provisions in the omnibus spending bill that prevent the DOJ and DEA from going after cannabis businesses that are following state laws

– How tribal lands are opening up to cannabis

– Nevada, the next state to have a huge impact on the cannabis industry

– The next big brand in cannabis

– Clinical Trials for cannabis as a medication

– Colorado: what worked, what didn’t from a regulatory and business point of view

– Hemp, its time has come, get ready

– Marijuana Business Daily Conference in Las Vegas

– How public opinion is changing even in conservative states

– What 2015 and 2016 look like for the cannabis industry

Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Each week I’ll take you behind the scenes to interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That’s www.cannainsider.com/trends. Now here’s your program. Today we’re going to have a little bit different of a show. I’ve invited two guests Alan Brochstein and Jay Czarkowski to help us digest and understand all the huge changes that have taken place in the cannabis industry in 2014.

A little background on both Alan and Jay before we get started. Alan is an expert on cannabis stocks and investing and is the founder of 420 Investor and 420 Funders, as well as a frequent writer on Seeking Alpha. Jay Czarlowski is a dispensary owner turned cannabis consultant. Jay is a managing partner at CannaAdvisors where he helps clients with not only obtaining cannabis cultivation and dispensary licenses but also with all aspects, the design, build, grow process that comes after winning a license. Welcome to CannaInsider Alan and Jay.

Male: Thanks for having us today.

Male: Thanks.

Matthew: So much ground to cover, 2014 was a huge huge pivotal year guys. Let’s get started with you Jay. What happened in the November election and how should we be thinking about this?

Jay: Well Matt I’m certainly no political analyst, but I can tell you this, the big votes were of course Alaska, Oregon, Washington D.C. and Florida. The first three of course passed. Florida did not, but the important thing about Florida, got 58 percent of the vote. Fifty-eight percent was more, from what I understand, than the last five governors, winning governors received, and I think the most any president got in Florida since Eisenhower. So, you may want to scratch that because I don’t know if that’s accurate.

Matthew: No, no. Fifty-eight percent is what I heard too, and that is absolutely massive.

Jay: And here’s what’s important. It didn’t pass because of course they needed 60 percent, but the people have spoken. You know the voters are on record and the majority of voters in Florida, they want medical marijuana. So hopefully even though it did not pass by referendum, hopefully the legislators take notice and they make something happen in 2015.

Matthew: Now there is certain oils that are legal in Florida though, correct? Is it CBD oils or do you know exactly?

Jay: Sure the CBD or the… it was a limited bill that was passed legislatively for a very very small number of operations just for oil. That program is not yet off the ground.

Matthew: Okay. Now turning to the stock market, Alan, what a crazy roller coaster year it was. Can you just kind of take us back to January all the way up to now? What are kind of the high points of the year?

Alan: Sure. Well the high point of the year that was easy. That was March 18th, and the way I look at it the stocks went up about 7-fold. And going into the year, exactly a year from now, there was a lot of optimism. The stocks has already started to move in anticipation of Colorado, and a lot of stocks doubled the first day of the year. It was so surreal watching the long lines in Colorado and the national and actually global media jumped onto this. So there was…and I had a pretty good vantage point to see what was going on and there were a lot of people who were just learning about the fact that there are stocks that are tied to the cannabis industry. And so we went about two and a half months of just non-stop, up every day and the biggest part of it, from my prospective, was not so much just that these companies that we began the year with started going up, but they multiplied. There were like… we now have about 250 companies, and we started the year with maybe 30 or something like that. And most of them actually aren’t even tied directly to cannabis. So as the years played out, Matt, the market’s been in decline. It’s been pretty steady, not too many bounces. And the way I measure it we’re actually down slightly year-to-date right now.

Matthew: Now the Omnibus Spending Bill, this kind of dovetails into what you were just talking about, Alan, is that in the Omnibus Spending Bill that President Obama signed, they’re withdrawing funds from the Department of Justice and the DEA to go after states that have some sort of framework or laws on how marijuana should be regulated from a medicinal or recreational point of view. Now that the federal government at least said they’re not going to pursue enforcement of this, do you see larger companies going public in pursuing cannabis profits?

Alan: I don’t know if that’s playing a role, but I think the issue about companies getting more involved is definitely topical. We’ve seen this year several companies get involved in Nevada or Illinois. For instance, and some smaller companies or larger ones in the space and then some smaller ones have actually expressed interest in, or done operations in Washington and Oregon and other states like that, even in California to some degree. So this has been a year of a lot of testing by these public companies to see kind of what they can do without getting in too much trouble. And most of the issues that have come up this year have not been related to marijuana. They’ve been related more to penny stock type issues of that matter. So I think this will probably put more wind in the sails of the companies that do want to cross what’s called the green line. So it is very timely.

Matthew: Jay now you’ve watched Colorado go from a medical marijuana market to a medical and recreational or adult use market. What has that change felt like for you as a former dispensary owner? How has the market changed?

Jay: Well certainly it’s difficult to quantify anything negative that’s come from that change. If anything, adults now have a safe, legal access point for cannabis and cannabis products. You know, there’s some talk in Colorado that teen use has not gone up. In fact some will say that teen use has actually dropped. Crime is certainly down in Colorado. In Denver that’s a well publicized statistic. It’s been great for the industry, and now that we have almost a full year behind us of legal cannabis in Colorado and the world has not ended, I think it’s only going to, you know, set the mark for other states in the country, if not other countries across the world to follow in our footsteps.

Matthew: Now Alan you’re in Texas. Now Texas is coming along, but it’s not Colorado. How have you seen public opinion change in your travels, but in specific in Texas?

Alan: You know it’s funny. I’ve travelled a lot this year. Colorado four times, Vancouver which is really maybe the capital of cannabis in North America. But here in Texas it’s interesting. They just hired… MPP just hired a full time lobbyist, and it’s definitely something that we’re working on. There’s been a lot of research out of the Baker Institute, which is part of Rice University. Very pro-cannabis in terms of there was a Texas Monthly article cover story I believe on PTSD for instance. So I see things changing here. There was a marijuana investment conference in September. A ton of interest really from across the state with that. We are on track right now to move towards, in 2017, medical marijuana in Texas. So I think it’s tough. I think I can see how we’re similar to Florida. Whereas Jay pointed out and you discussed the 58 percent approve it, and that’s medical not legal cannabis. But I’ve seen over the last couple of years a big move towards that direction, an open-mindedness towards medical. We’re probably, even in Texas the majority do support it, but there’s a very vocal minority.

Matthew: Now Jay there was a big change in how the federal government looks at cannabis growth in tribal lands all across the country. And you tell us what happened, how the federal government stepped away and what the opportunity is going to be?

Jay: Sure that’s a very very new development that I don’t even think has really fully presented itself yet in terms of details. All we know is that the federal government made an announcement that they would not interfere with tribal nations if they wanted to develop, you know, cultivate and sell. Now I’ll make a couple of examples. CannaAdvisors has begun to look into this only because we have a close relationship with a gal who has done a lot of grant writing for a number of Indian reservations in the west. So she has very very close relationships with a lot of these tribes. What would be a homerun, I will use Colorado as an example is if it would be possible to develop a relationship with an Indian reservation in Colorado where you could not only cultivate it and sell it on the tribal lands, but cultivate it and then distribute out to, you know, any number of dispensaries in Colorado. I think that would present a large number of regulatory issues, you know, potentially at the federal, state and local level. But it’s a conversation worth pursuing. Where it will go, we’ll have to cover that at the yearend review in 12 months I guess, but it’s a very exciting prospect for sure.

Matthew: Go ahead Alan.

Alan: I’ve done some research on that. I’m actually going to take the under in terms of the potential there right now. I think it could play a role in some states, you know, like Jay just mentioned in Colorado where it’s already legal. But the fact is from what I’ve determined the Indian tribes have to follow federal law and state law. And the federal law right now it’s not legal. That was just a Department of Justice interpretation or administrative letter. And as we know that Department of Justice is living on borrowed time right now because we’ll have a new president no matter what in a few years. So to go against state law is going to be a big challenge. I think it was one of these stories that just popped up out of the blue, and it sounds very promising, but I think there’s a lot more exciting things going on in that story.

Matthew: So just to help me understand what the tribal land opportunity and the potential problem is is that potentially the tribal lands might not have as much work to do satisfying certain regulatory requirements because they’re in a sense they’re island within a state and they may be able to do things a little bit easier or on a larger scale or maybe perhaps with a little less oversight. Is that what you’re thinking, Jay and Alan, that that’s what some people are saying the opportunity is?

Jay: Well I think all those things are possible. Let me give you an example. I’ll just use Colorado as an example because I live here and this is where we started our business five years ago. It certainly might be possible for a Colorado Indian reservation to begin to cultivate vast amounts of cannabis flower, but you know how is our state regulatory agency, the MED, how are they going to feel if, you know, the dispensaries begin to purchase from the Indian reservation. I don’t think any dispensary owner would put their license in jeopardy if the state of Colorado did not approve. Then there’s of course all the testing requirement, inventory control and tracking requirements. I think it will be very messy, but again I think it’s an idea worth pursuing and developing and you know seeing where it goes.

Alan: I’ve been tracking this whole concept for a while, but my thinking was it would play out in Canada where they have the federal system and there’s already, I think they call them aboriginals, they’re not Native Americans, kind of a weird term. But I think there’s a bigger likelihood that some of the tribes up in Canada are able to secure a license with Health Canada and for something really big to happen in the United States.

Matthew: Now Alan turning to Nevada, I know you follow a few companies there that are doing big things. Can you tell us what happened as far as Las Vegas granting licenses and who you think will benefit the most from that going forward?

Alan: Sure I know Jay probably can weigh in here too. He’s more expert about this than I am given he’s consulting. But from my prospective, so I’ve been watching this. I have to say, this has been quite remarkable, the amount of transparency from the local level. I’ve watched several county and city hearings that have been… they’re recorded but there are also live web cast on the internet. Very transparent process and as I mentioned earlier we’ve seen some public companies get involved in this process. And the state really tried to avoid some of the problems that have been dogging Massachusetts which still isn’t up and running yet despite the fact that it should have been more than a year ago, if not even longer. So the whole process has run into some problems. You know, I’m not going to point fingers but I will say this. The patients are going to lose.

So there will be some delays in Nevada, and there’s a lot of uncertainty right now about the full number of licenses, but it’s going to move forward. This is exciting to public company investors because there are a couple, actually there’s more than a couple because there’s some lab plays as well. There’s a handful of companies that are publically trading that are involved in this process. Nevada has reciprocity, meaning that anybody that holds a card in another state that comes to Las Vegas on vacation will be able to access these dispensaries. And so it’s going to be a much larger market than you would think based upon just the local population. On top of that, it’s pretty evident that if not in 2015, certainly in 2016 Nevada will be legal. So right now Colorado is the king of cannabis, and it probably will remain so, but I bet you Nevada can give it a run for the money.

Matthew: Jay how about you? What do you think about Nevada?

Jay: Yeah, you know, Nevada is clearly going to be the next great state in the cannabis industry for a lot of the reasons that Alan just mentioned. The reciprocity with other medical states is going to be big, certainly with California being right next door with their one million or so patients. But what’s also important to understand that I don’t think may people do understand is the folks in Nevada over the last few months put forth a petition drive to get legalization on the ballot for 2016. They have to do it that far in advance. And they got the votes that they needed. So if something does not happen legislatively in Nevada in 2015 in terms of full on legalization, it will be on the ballot in 2016. Now I can tell you this. The republicans who currently control things in Nevada, they are very interested in taking care of this issue before the 2016 election for obvious reasons. So don’t be surprised if you see Nevada legislatively pass recreational legalization in 2015.

Matthew: Ah they want to get credit for it is what you’re saying.

Jay: Well they want to get it done before the issue brings out a larger number of democratic voters in 2016, younger voters potentially.

Matthew: Now staying on Nevada for a second, Jay, how many licenses were granted exactly, and do you think that… how do you think the number of licenses that were granted will affect the supply of cannabis that comes onto the market initially and then down the road? Because it was kind of a lot wasn’t it? Is it in your mind?

Jay: Sure if you break it down between dispensary and then cultivation and infused products production, the original state law only limited the number of dispensary licenses. That limit by law was a total of 60. For different reasons, some disparity between local approval and state approval, that number was going to end up being between 40 and 50 would be my guess. Probably closer to 50 to start. Now they were very very generous with cultivation licenses and infused product licenses. Of course there were really no limits, and almost everyone, every team who put forth an application received a license. Now clearly there will be a number of those groups that just don’t have the business wherewithal or the capital to execute, but the majority of them will. Will there be an oversupply of cannabis in Nevada? I just have a tough time believing that there will only because, you know, we’ve been at this now in Colorado for years and we have yet to really have an oversupply that really greatly drives the price down. So even with a large number of cultivation licenses, I’ve got to believe that things are going to be okay. The industry will develop, and I don’t think there will be too big of an oversupply.

Matthew: Now switching gears. Alan you’ve probably heard about the Marley Natural announcement from Privateer Holdings in Seattle. Can you tell us a little bit about that and your thinking? Is this the next big brand of cannabis?

Alan: Yeah it’s too early to say. Obviously it’s a great name, and I have a lot of respect for Privateer. I think most people are familiar with Leafly and come on, and this is actually their fourth area of focus. I think the bigger point, Matt, is that we don’t have brands yet. I’ve been watching the Pot Barons of Colorado. It just ended last night, six episodes. And that was one of the big takeaways. Everybody wants to be the next big brand. And it takes a lot, and the laws right now make it very difficult. For instance, listening to Tripp Keber, who obviously wants to be one of those brands. I think he said it takes $5 million per state to set up the license, you know, the production for the licensees that they want to use. So it takes a lot of capital. So we’ll see if Marley ends up being that brand. There are several others that are front runners, but it’s going to be a tough fight I think as long as we have federal illegal, you know, federally illegal makes it very difficult to establish these brands.

Jay: You know I have some strong feelings on that as well. Guys, and again I’m a big fan as well of what… a big fan of Privateer. I think Brandon’s doing a great job. He has over the last couple of years, but you know I’m certainly a fan of Bob Marley. I used to spend time in Jamaica as a kids and certainly smoked plenty of ganja back in those days. But I mean let’s face it, you know, the industry needs some fresh brands. You know you can only go so far promoting, you know, Bob Marley, Cheech and Chong. I think the industry is ripe and the consumers want some new brands. And I think we will see the start of that of some new brands being developed certainly in 2015.

Matthew: Maybe a Martha Stewart brand?

Jay: You never know.

Matthew: Now Jay you have some interesting ideas around greenhouses versus indoor growth. Can you tell us how you think about this and how the general public should start to maybe shift their opinion of growing plants indoors?

Jay: Sure, I don’t even think they’re really interesting ideas. I think it’s just getting back to basics the way horticulture, the way plants are grown in the world. Now, you know, all these indoor grows, these warehouses, you know, our first grow five years ago was certainly in a warehouse and a lot of them still are today because that’s really where the industry came from. Not from warehouses but from people’s basements, spare bedrooms or garages. And you know, growing indoors was where a lot of this had to be grown over the last 75 years because it had to be hidden. It was illegal. In a lot of the warehouses today in Colorado some of the indoor warehouse operations that are touted is the best operations in Colorado are really just, you know, great big basements. There’s a lot of unnecessary technology. There’s a lot of energy used on lighting. Then of course the light creates heat so we have to use more energy to provide cooling. It’s just not sustainable. And there are larger, more efficient greenhouse operations being built today. Some of them are in operation today in Colorado and there’s certainly many greenhouse operations operational in California and probably a couple of other states.

Indoor growing is just not sustainable. And if you think about it objectively, what else do we grow in a warehouse under artificial lighting? I cannot think of a whole lot except for maybe micro grains. You know I will make a bold statement here today on CannaInsider. The majority of these indoor warehouse grows in Colorado, I just don’t think are going to be around in the next two to three years only because they’re just simply not going to be able to compete economically with the more efficient greenhouse operations. You know we stumbled into this as we were growing our consulting business 12 months ago by hooking up with a gentleman who has been in the horticultural industry for 35 years. He had a PhD in horticulture, worked with some pretty big companies, consulted all over the world. And we began to learn from him that really cannabis is just another plant. It’s certainly unique in a lot of ways, but I think we’ll see in 2015 more traditional horticulture coming into this industry.

Alan: I’d add to that Matt or I’d actually ask a question towards Jay. Isn’t the move towards more extracts which are used for either, you know, direct concentrates or for edibles. Isn’t that going to hasten that move even more?

Jay: Well yeah. You know certainly, I think ideally, Alan, for producing oil I think eventually we’ll want to grow cannabis in fields if you could, you know, clean it up for the oil extraction process. But you know, efficient cultivation of cannabis is only going to drive cost down. It will certainly drive the cost of oil down. So yes I think greenhouse growing is absolutely the way to go especially if you’re just going to turn it all into oil and extract.

Matthew: Now looking back on the year in investing, Alan, what are some of the companies that really stood out? Maybe pick an MVP, and then if you could go back in time to January 1st, which company would you have made the most money in if you put $10,000 in?

Alan: Yeah the MVP is easy. I think GW Pharma is a company… I think we can argue maybe about the valuation that in terms I always ask my subscribers, do you trust the company and are they moving forward. And unfortunately for the 250 or so companies I’m tracking, the vast vast majority I’d have to answer at least one of those questions no. But GW Pharma, I think almost everybody would say yes, but it’s expensive. And so for your listeners that don’t know GW Pharma is a UK company, and they really… I would award them MVP this year because while they were talking about childhood epilepsy and their approach to it, they really pushed it this year and it’s almost a miracle what’s going on. And they started a clinical trial with the FDA, and we could be within two years of these… I mean I don’t know if you know anybody with childhood epilepsy, but the treatments are terrible, the symptoms are horrible and we need this to happen. And to have it happen in a way where we can get doctors on board, and that’s the way GW Pharma’s approaching it, you know, through the FDA.

I think this will be one of the greatest stories ever for cannabis quite frankly and it’s playing out right now. After that, it gets a little bit rougher to identify companies that we can feel really, really good about. To answer your question specifically which company could you have invested in at the beginning of the year. I don’t even want to answer that because quite frankly I don’t have the exact answer. There’s a bunch of what I think are not very good companies that had great years. There’s also some companies that I think are okay that didn’t have such good years. So there are many companies that are still up a lot from the beginning of the year Matt.

Matthew: So March 18th though that was the…that’s when it really just kind of all exploded and it’s just kind of been all over the place since then, but has gone down.

Alan: No it hasn’t been all over the place. It’s been death by a thousand cuts I would say. Unfortunately it’s been, you know, it’s the best of times and the worst of times. And at the beginning of the year I was so nervous and cautious and you know, I guess people hear what they want to hear. I wrote a few articles about it, and it wasn’t sustainable and it brought in people. And I know we’re seeing this in the industry as well. When there’s a lot of money to be made quickly that leads to short cuts and the wrong type of activity quite frankly. And so the rest of the year it’s been trying to correct. I mean I don’t think that you can make the case that penny stocks are a great place to be. Unfortunately that’s where our industry is right now because of the banking laws and all sorts of stigma issues. Whatever the reason we have to deal with what we’re dealing with, but unfortunately even though the prices are, you know, essentially unchanged, some are up, some are down from a year ago. It’s not like people can invest in the space and think that they’re investing in blue chip companies. We’re not there yet.

Matthew: Now you mentioned banking, Alan. Jay what do you see happening with banking in 2015?

Jay: Well Matt I have been predicting and hoping for changes in the banking regulations for five years. So I don’t want to predict that it’s going to be fixed in the next year, but clearly things are heading in the right direction. In Colorado we are supposed to have a credit union opening up in 2015 and it’s going to cater to the cannabis industry. I don’t know the details on that, but I am actively looking to find out only for our own in house and our client purposes, but it’s a big problem. It’s shocking. I know of two or three businesses and they don’t even touch the plant. They’re ancillary businesses to the cannabis industry that just had their accounts shut down last month. So it’s still a problem, and gosh I can’t wait for it to be fixed.

Alan: Jay I tried to open a bank account. I don’t touch cannabis. I don’t, I mean I’m saying my business doesn’t touch cannabis. I couldn’t open a bank account because I used the word cannabis. I mean it’s ridiculous.

Jay: Yep.

Alan: Hey Matt I was in.. well we were all in Nevada last month, and I thought one of the most interesting presentations was by the CEO of First Nevada. Is that the name? No, I’m blanking out on the name, but Security, First Security, sorry I don’t remember the name. But there is a bank in Nevada that obviously there’s no business open yet there, but when it’s open there will be banking in Nevada. And this is really exciting. One of the takeaways I got from his presentation, he’s kind of a trailblazer. So he’s opening all of these accounts, but nobody’s doing business yet. And so if they don’t get shut down, then it’s a go. And they are a state licensed bank. They’re not a federally chartered bank. But he said in his presentation at the conference that for the banking system to really get fixed, we need to see cannabis rescheduled. So that’s something to look out for.

Matthew: Now Alan there’s some clinical trials going on in terms of marijuana as an actual medicine that we would kind of think of as a medicine that a doctor prescribes. Can you tell us a little bit about that?

Alan: Yeah, you know, I think this is one of the most essential things for the industry. I’m actually working on something right now for year end. We need medical marijuana to be more medical. And this has to do with not just like you walk into a dispensary and it doesn’t seem like it’s medical, but it’s also, it goes a lot deeper than that. It goes to standardization of product. It goes to delivery mechanisms. No other medicine in the world is smoked. And maybe this is the exception. But we need to see clinical trials. We need to see proof. Even though the anecdotal evidence is clear, we need to see this done in a way where doctors can feel more comfortable about prescribing cannabis to their patients. This will help all the states where we have legal cannabis or medical marijuana right now. It will also help states like mine, Texas, or the others like where we just missed in Florida. When they have that evidence they will be able to move forward.

One of the travesties this year was Dr. Sue Sisley’s work on post traumatic stress disorder. This was a project that was funded and ready to go in the University of Arizona. There was some politics and they fired her. Recently she just received a $2 million grant. This is incredible. It was from the state of Colorado which is really nice. The recycling, reinvesting into the industry. The problem is and I just communicated with her this weekend, she can’t get the cannabis. In the United States there’s only one place to get marijuana for your studies and it’s from NIDA, the National Institute on Drug Abuse which is kind of ironic. They’re not about promoting marijuana research. And they have been stymied by NIDA so far, even though NIDA approved it in June after the March application. So hopefully that goes through. I think PTSD, I mentioned childhood epilepsy earlier. These are things that I can’t imagine anybody not wanting to help these patients. The veterans are a primary audience there. These people, whether it’s pain or trauma, psychological stress that they come back from after fighting on behalf of us, we know that cannabis can help them. We need to study it. I’m kind of excited about this. I think we’ll see more of this next year.

Matthew: Jay switching gears to hemp. You know hemp doesn’t get as much attention or the spotlight like cannabis does, but this Omnibus Spending Bill that went through looks like there’ll be even less enforcement on hemp. But in particular in Colorado how do you see that helping the state? How do you think hemp is going come into play in Colorado?

Jay: Well, you know, I know as of two years ago growing hemp became legal in Colorado. I am not a hemp expert. I’m not very involved in hemp production right now. But I can tell you this much, Matt, we’re the only industrialized nation in the world that does not grow its own hemp. And that’s quite shocking especially with all of the uses that we could, as a nation, with our ingenuity what we can do with the hemp plant. And that’s beginning to happen now. What do I see in it for Colorado? I see Colorado becoming the national leader in not only the production of hemp, at least for the time being. I think there’s probably better areas in the nation to cultivate hemp, but right now if we’re it and there’s other states that are following on our heels as we speak. Once we begin to process the hemp and begin to make products from it, you know, we’ll probably have a short window where we could establish ourselves as a leader.

Matthew: Now that plays right into the next question. Where do you see Colorado? What did they do right in 2014, and what did they get wrong overall?

Jay: Sure, well, I think the most important thing that we did right in Colorado in 2014 was January 1st of last year? And I’ll tell you this, the Czarkowski family was up early that morning, and we all travelled down to Denver. It was about 6:30 in the morning New Year’s Day, and we went to the 3D dispensary just because we wanted to be there to witness the first recreational sale and we did. And what was very telling and very important about that first recreational sale it was to a US Army veteran who suffered from PTSD. And this young man was not able to purchase cannabis legally because PTSD was not one of the accepted medical conditions in Colorado to become a medical marijuana patient. So he was there day one to purchase cannabis to treat his PTSD. The biggest thing Colorado did right was to make that big leap and become the first place in the world where people could by cannabis legally. That was huge.

Matthew: Wow there’s probably a lot of excitement there that morning I would imagine.

Jay: It was very exciting. I had no idea until we pulled up and there were probably no less than a dozen satellite news trucks parked out front. And there was so much national and international press that this young Army veteran, he had to actually make two purchases because they could only fit about half of the press in the dispensary at a time. So he kind of went through two purchases so that all of the press could have a chance to photograph him and everything else. Now what has Colorado done wrong and, you know, where do we have to go? I mean we’re pioneers in this. So do we… does Colorado have it all figured out, of course not. We have a long way to go, but Colorado has taken a lot of steps to improve things this year. I think one of the big improvements has been on the labeling of edibles and more accurate dosing, more accurate labeling. That’s a big step in the right direction. There’s still a lot of work to be done.

Alan: From the outside it seems like the government and the industry are working very well together Jay.

Jay: For sure, you know, I think the industry and the state regulatory board are working well together. I think there’s a number of local municipalities that are very supportive of the industry, and there’s also a number of local municipalities that are quite hostile to the industry even now after five years of medical. But the state as a whole, you know, they are, you know, enacting the will of the voters.

Matthew: Yeah. Now looking ahead to 2015 and I also want to lump in 2016 because that’s just such a huge year. Alan why don’t you tell us what you see coming down the pipe for 2015-16.

Alan: Well we didn’t really touch on Canada too much.

Matthew: Yeah let’s touch on Canada.

Alan: Well so that would be part of my response. I think when we talk about things like this usually people are focused on which state is next. And I think we haven’t talked about Canada and I’ll do that in just a second, but also California. And it’s interesting because Jay and I are both very bullish on Nevada but that could change in a heartbeat if they got things right in California. That would be one of the most amazing things, and it’s possible that they could get some competition. You know Jay laid out a case where maybe Nevada goes legal in 2015. That may push California in 2016. So I think we are down the road already and there’s no turning back. And so we’ll see some of these states play out and obviously California would be a big one.

I think Canada is really interesting and most Americans aren’t really paying attention to it. But they have a federally legal marijuana program, medical marijuana program up there, and you know there’s large scale production facilities that are being constructed right now. It’s not a perfect system at all and it’s been off to a slow start, really need to go there, but certainly a little bit of a disappointment in 2014. But I think that’s going to really come on strong and they may move towards legalization in Canada in 2016. They have, there’s some federal election there and that’s already an issue that’s being discussed. So I think that could definitely be something to keep an eye on. I’m not looking for any sort of progress on federal legalization, but I am hoping that in 2015-16 we see potentially rescheduling or at least a discussion about that. There were hints this year of conversations between the FDA and the DEA, and I think that would be huge if we could see that next year. I think that would help unlock the banking problems as well.

Matthew: How about you Jay?

Jay: Well in 2016 we’ll certainly see a number of states legalize cannabis. And like Alan I also love the program in Canada, the first federal program. In terms of states that I think are going to go in 2016, I think a lot of people are betting on Arizona, Nevada and a number of New England states as well as Canada. One thing that I like about New England is that it’s a small area. So if one state in New England, I’m going to use Rhode Island as an example, Rhode Island is looking pretty good for possible legalization in 2015. Well what is that going to mean for the medical program in Connecticut which is quite limited right now when people could just travel across the border. You know drive 30 to 45 minutes and purchase cannabis legally. I think as more states begin to go legal it’s going to put a certain amount of pressure on other states to follow suit.

Matthew: Yeah that makes sense. But you know one thing that intrigues me is that some states, Jay, just don’t get it right are just doing it. You know we gave Colorado a good score here overall, but some states are just doing a terrible job and they’re not creating functioning markets. I mean will they really feel that pressure to change as the other states, you know, turn up the heat a little bit or is it just they’re so mired in dysfunction that there’s no hope?

Jay: Well I don’t know if it’s dysfunction, and I hate to use the word ignorance, but let’s just say a lot of people in a lot of places are still learning. You know, whenever we move in to a new state and we begin to compete for licenses, you know, it’s new. It’s new to a lot of people and a lot of times what people don’t understand is scary and we run across that a lot. You know I make the joke out at Massachusetts, certainly in Connecticut when we’re working out there competing for licenses. You know, everywhere we went the local government, local officials, you know, you would think that we were working with plutonium. I say that word all the time, but you know you would think that we’re dealing with plutonium. But as people begin to get comfortable with this, which let’s face it, in a lot of places now people are beginning to get more comfortable with this. And as people become more comfortable with this plant and they realize that not only is it a lot less harmful than alcohol, but there are also tremendous benefits to its use, I think we’re going to see government officials in a lot of states and local municipalities begin to pass laws to grant their citizens access.

Alan: I think that’s really well said. I think it’s scary for a lot of people. And we see a lot of these programs. Jay, I’m sure you’re very critical of them like New York State what they just proposed, very similar to Minnesota. Highly, highly restrictive, not good enough patient access. When we do see a state come on it takes longer than we’d expect. Everybody’s worried about who’s making money instead of helping the patients. I think over time this all gets better.

Jay: Sure. It’s a lot of stepping stones. I’ll use Illinois as an example only because right now in terms of a state and you know, we’re supposed to hear any day now, possibly this week on who won licenses in Illinois. Talk about a restrictive program. To become a patient in Illinois, you have to go through a background check. You have to be fingerprinted. Now you can go to the pharmacy, get a giant bottle of Percocet and drive home with that and a bottle of Jack Daniels, but if you want to get some cannabis, I mean they literally, you know, treat you like a criminal. But you know, keep in mind the reason that is is because when it was time to pass that law in Illinois, and they needed to get the votes that they needed to make it happen, they had to give these concessions. It’s a stepping stone. Do I think the program in Illinois is going to be that restrictive in, you know, three or four years, god I would think absolutely not, and the same with Minnesota and New York.

Matthew: Now Alan and Jay too, you were both at the Marijuana Business Daily conference in Las Vegas this year. Can you just king of paint a picture of what it’s like there for the people that might not have gone, and how it was different from last year, how much it’s grown or changed?

Alan: I’ll take that first. I wasn’t at the one from the year before, but I attended a lot of conferences this year. And it struck me for the first time, at least in my observation, that one of the big problems for this industry has been new entrance versus people who are more entrenched not getting along. And it seemed to me that everybody was getting along and realizing that both those camps bring something to the table. So that was one of my major takeaways. I was able to obviously review the statistics from a year ago when the number of people was, you know, more than 100 percent I believe. So obviously the industry, it was a great sign for the industry that that many people were willing to take the time to participate. But my takeaway was really just maybe more of a hope for better cooperation among the players in the industry.

Matthew: Okay.

Jay: You know, it was only 25 months ago that MJ Business Daily held the first true business conference, and that was in Denver and there were maybe a couple hundred people there. That’s when I met some of the first folks that we began to work with in Massachusetts. I think I remember that was the event I met Steve D’Angelo for the first time. It was a small event. The following year which was, you know, 13 months ago in Seattle it was at a horse race track outside of Seattle, and I think there were about 500 to 600 people there, and it was a good event. You know, this year I don’t know what the final was. Was it 3,500 or 3,600, and I think more people that wanted to get in, I think, from what I understand from talking to some of the security folks, 40 to 50 people that attempted to sneak in without a ticket and that were eventually escorted off the property. It was crazy. You know people came from all over the world to the last business conference in Vegas. You know, I don’t mean to shamelessly promote anyone, but I can tell you this, a lot of different businesses are coming out of the woodwork putting on conferences. You know, I feel that the MJ Business Daily was the first, and I feel like they just do such a great job with trying to do what they can to, you know, come up with a good board of speakers without any favoritism, the people that are their friends, to really put forth good content. I know next year their fourth annual conference is going to be back in Las Vegas. And god if I were to make a prediction of attendance, I’m going to say it’s going to jump from 3,500 to 10,000.

Matthew: Wow.

Alan: I thought it was in Chicago actually in May.

Jay: They’re doing something different. They’re going to have a mid-year conference this year. So they’re going to conferences now… the big one is still going to be in Las Vegas in November of 2015, but they’re going to have a mid-year conference in Chicago in May.

Alan: Got it. Thanks for clearing that up.

Jay: Yeah and they were originally, when they came out with their marketing for the Chicago conference, they said that they expected about 1,000 people. But I can tell you this, you know, my company is going to be one of the sponsors. And I received an email from them a couple of weeks ago where they tripled the amount of event space. So, yeah, you know, what does that say for attendance, I think they’re probably going to end up with a lot more than 1,000 people in Chicago.

Alan: And kudos to them. They stepped it up. They brought in a professional from the outside who’s been working with them since, I think, since May. And he’s done a really good job. That’s great for the industry.

Jay: Yeah they’re doing a good job.

Matthew: Well in closing, Alan, can you tell us where listeners can learn more about your work at 420 Investor and elsewhere?

Alan: Sure. So www.420investor.com is where I can be found, and I’m pretty known for that. And that’s our community focused on publicly traded stocks. And this year I also opened another community called www.420funders.com. It’s evolving a little bit. The primary focus there, Matt, was to connect… there’s still a huge problem. A lot of people that want to invest in the industry and a lot of private companies that are seeking investment they can’t connect. And so that’s one of the answers that I have to create a way for them to connect. But I’m also taking that concept one step further. Recently I started focusing on some of the people in the market who are investing on behalf of others like Privateer. ArcView doesn’t actually invest on behalf of others, but I’m trying to bring a level of outside review to some of these entities like Poseidon Asset Management as well or Electrum Partners. So I’m going to be hopefully spending some of my time helping people who want to invest in private places, find people that can help them or also invest directly if that’s what they choose. And that’s www.420funders.com.

Matthew: Well that’s helpful because I know there’s a lot of investors that would like to find a way to participate but don’t know where to start. So that’s great. Jay, can you tell us a little bit about what CannAdvisors does and how listeners can connect with you?

Jay: Sure, the easiest way to find us is go to www.thinkcanna.com, like think about it, t-h-i-n-k. And of course when spelling canna, please don’t forget to put two n’s in the middle. I think we can also be reached through www.cannaadvisors.com. But we have been in the industry since 2009. I like to describe us as a group of battle scar veterans from the early days here in Colorado. And we have been competing for and winning competitive licenses, building operations and managing facilities since 2009.

Matthew: Well Alan and Jay, thank you so much for coming on CannaInsider and doing this yearend wrap up. I really appreciate it, and Happy New Year to you both.

Alan: Happy New Year to both of you.

Jay: Matt, thanks for having us, and Matt and Alan Happy New Year.

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