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

In This Episode, Bryan Fields and Kellan Finney sit down with Collin and Mike, founders of MJ Research Co

Colin and Mike set out to revolutionize the Cannabis market and provide insightful and professional-grade research for investors.

This episode of The Dime Podcast explores the market trends and investments of the Cannabis industry as well as:

  • What trends do we see in the current Cannabis Market?
  • How can reading margins and scalability help Investors?
  • How will pricing be impacted as more states legalize?
  • Will the demand for Cannabis change with growing licenses increasing?

Learn More at https://mjresearchco.com/


[00:00:00] Bryan Fields: This is the dime, dive into the cannabis and hemp industry through trends, insights, predictions, and tangents.

[00:00:11] Bryan Fields: What’s up guys. Welcome back to the episode of the dime as always. I’ve got my right-hand man Kellen Finney here with me. And this week we’ve got a very special guest Colin Farian and Mike Regan of MJ.

[00:00:22] Bryan Fields: Gentlemen, thanks for taking the time. How are you doing today?

[00:00:27] Bryan Fields: Yeah, we’re still have to kind of dive into a variety of different topics. And I think before we can get into MJ research and the, and your backgrounds, I think we should start with one of the hardest questions there is in the game, which is living in your ceased.

[00:00:40] Bryan Fields: Gentlemen, who is your ideal cannabinoid session with ,Collin go first

[00:00:46] Colin Ferrain: ideal cannabinoid discussion.

[00:00:49] Colin Ferrain: So smoke cessation

[00:00:51] Colin Ferrain: session. Ooh, man, it’s hard because there’s a lot like between, you almost have to subsection it between the folks that really [00:01:00] established the industry and the folks that are moving into long.

[00:01:02] Colin Ferrain: I would say in the folks that are moving along, Ben cobbler is probably an easy option. And folks that have got us to where we are now. I mean, is Steve de Angelo to even option. I go with those two.

[00:01:17] Mike Regan: I will get certain listen in that, as you’re saying, like we’re actually, everyone’s smoking up and actually discussing everything because I’m not an enormous consumer.

[00:01:27] Mike Regan: I actually do have a good memory of one. Which was a, the fish show and Worcester in June, 2012, where I think the entire hockey arena was hotbox. So that was a pretty good stock session. No, it was really good music. And when you know, just a good vibe for nano 10,000 feet, that’s nice that

[00:01:47] Bryan Fields: 10,000 people to put that on for everyone else.

[00:01:51] Mike Regan: It is like, I’ve seen this in a minivan. I’ve never seen this in the DCU center choices.

[00:01:59] Bryan Fields: You’re going to have to have [00:02:00] us come back to that. So, uh,

[00:02:06] Kellan Finney: Elon Musk, right? Just like Joe Rogan on his podcast. It’d be nice to have him on and smokes weed. And Chad,

[00:02:12] Bryan Fields: what about you, Brian? Cuban probably you’d probably be too, too high energy for me though. I’d probably give me some anxiety because we’d just be ripping through ideas on it, like, all right. The session went completely.

[00:02:24] Bryan Fields: Let’s have back to the, to the question. So let’s dive into your backgrounds. Obviously cannabis is a really unique space. How did either of you guys get into the space? Mike, do you want to go first? Sure. In terms

[00:02:33] Mike Regan: of getting into the cannabis space I joined about two years ago. Well, it really gets more again, more about three years ago.

[00:02:40] Mike Regan: My background is, uh, basically a life-long long, short equity investor, uh, various hedge funds and on the sell side, Uh, doing primarily fundamental bottoms up, uh, research, you know, investment research, uh, but had done some quantity as well. Uh, two years ago it was [00:03:00] looking at, uh, Scott’s miracle grow on something totally unrelated to cannabis.

[00:03:04] Mike Regan: Uh, it was a pricing power thesis versus home Depot Lowe’s. And I had to figure out what this Hawthorne division was. Uh, they had, which you know, was became pretty quickly obvious what it actually was really doing so that I was like, this is actually pretty interesting. Which also coincided, I guess, with the Canadian, the Canadian stocks ripping up to same valuations, uh, through that, just doing that research, I found MJ biz daily is like good source of information for the industry.

[00:03:31] Mike Regan: You know, just looking at dedicated myself. I’m like, look, this whole thing could be, and then they had a job posting for we’re launching. Premium financial service. Uh, we need someone like we can teach you cannabis, but we need someone who knows everything. That’s not cannabis, like, you know, financial analysis, company analysis, company strategy, you know, valuation, things like that.

[00:03:52] Mike Regan: So I joined them in 2019, uh, to write for them. Their premium investment service or calling investor [00:04:00] intelligence at the time. And then that was going great until COVID hit. Uh, and they had to retrench given that, uh, there was no conference in Vegas, uh, you know, no MJ biz con. Uh, but I still thought the general concept was a good idea and yeah, pretty convinced of the overall long-term macro freight train investment theme, you know, for the next 10, 20 years, you know, I think cannabis will be a pretty interesting investment thing to, to know better.

[00:04:26] Mike Regan: And it has a lot of market inefficiencies. So I’ve launched M J research go to basically continue that concept of, you know, institutional professional grade investment research. Um, this nascent industry. Yeah, we’re going to have a lot of lights to it and, you know, Long, and I think eventually short opportunities across both the sector and other sectors and you know, the whole supply chain and disrupting traditional industries as well.

[00:04:51] Mike Regan: So that’s, that’s basically what that brings me to here. Uh, making my column jumping. So I started

[00:04:59] Colin Ferrain: like pretty [00:05:00] traditional finance background. Um, up in Craig Hallam in Minneapolis is a boutique research-driven investment bank and was lucky enough to get hired for a long short fund in Boulder, Colorado.

[00:05:11] Colin Ferrain: And after a couple of years working, uh, doing equity research analysts, uh, analysis on the bicycle. Actually underwrote a company called Mr. Dean back in 20 16, 20 17 or 2015, maybe regardless. This is at the time when cannabis companies were literally grown out of a storage locker in Boulder, they had rented out three of them put on the wall.

[00:05:34] Colin Ferrain: They had this huge cultivation, just like right off of Pearl street, which is downtown Boulder, if you’re familiar. So underwrote that, that did not go well. I can still, I think it’s publicly traded at this time, but sparked my interest in the industry and moved from equity research and want to get a little bit more empathy for the operator role.

[00:05:53] Colin Ferrain: So I switched into the cannabis industry where at first I had, co-founded a company that I was doing [00:06:00] computer vision over. Uh, called deep green, weird, sexy, and like pests and pathogens and doing a bunch of IPM work with companies and that transition into a role at urban grudge to the picks and shovels company, where I was directing all MSO accounts, uh, doing strategic operations.

[00:06:16] Colin Ferrain: Cultivations and then ongoing, uh, operations for cultivation. So like IPM and then design strategy. And then I found Mike probably like a, yeah, couple of years later, uh, listening to a podcast and it was thinking that I wanted to get back in the investment world. And so I reached out to Mike and said, yeah, okay.

[00:06:32] Colin Ferrain: I want to build the exact same thing that you’re building. Um, would you, would you have me and. It

[00:06:38] Bryan Fields: proved cannabis love story. Let’s dive into MJ research, you know, what is the value that it brings the industry and who does it really target from an informational time?

[00:06:49] Mike Regan: It’s we, we think we’re stronger together than apart as well.

[00:06:52] Mike Regan: So I was like this, this will work. Uh, we, you know, our strengths, uh, sort of compliment each other just in terms of. More [00:07:00] experience. Yeah. Living through the internet, boom and bust and resurgence and the housing, boom and bust and, uh, you know, multiple market cycles and looking at every industry. And Collin is super deep knowledge on, you know, the plants and the cannabis itself in terms of the firm, you know, we’re basically trying to target credited.

[00:07:20] Mike Regan: Institutional grade or just institutional investors. We’re basically providing what the research that we would want if we were running a fund or if we were at a fund and we’re like, Hey, this has been morning email to my portfolio manager of the things I’ve been saying that we should be doing. And we’re basically trying to bring that institutional level professional.

[00:07:41] Mike Regan: Great analysis to this sector. Uh, yeah. Cause we, we, we see a need for it. Uh, as an increasingly matures, I think that’s also, there’s going to be an increase in demand for that among a lot of investors that currently can’t, you know, because of the federal illegality of their own, you know, investment mandates or the, you know, what are [00:08:00] the things trade.

[00:08:00] Mike Regan: They can invest directly in this space, but we think that’s going to keep changing with increasing legalization. So. And on top of that, it’s a very, very complex space, especially like in the capital structure. We can go into that later. Never seen capital structures. This complex, the regulations are always changing.

[00:08:15] Mike Regan: It’s a bunch of micro markets. So that’s basically what we’re trying to do. So we’re providing, we sort of mentally divided into tools, which are, you know, the things that investors need if they want. to truly have accurate, actionable information and sort of make their own decisions. You know, these are the tools they’ll need, you know, in terms of like our, our dynamic top table, we’re working on some supply demand, analyses, normalizing things across industries to help prepare the companies.

[00:08:44] Mike Regan: Um, and then also, you know, just actionable company, specific research. Like we think this company is interesting. You should buy it. This is, we’ve done the research on it. You know, here’s the consensus view. Here’s our contrarian tape. Uh, on it, then, you know, here’s our evaluation. [00:09:00] We’re sort of bouncing those out as well as we’re building those up.

[00:09:03] Mike Regan: And then if there’s anything else I’ve missed column that you’d like to throw in.

[00:09:06] Colin Ferrain: No, I think that’s, that’s great, Mike. Um, I think what got us here and, you know, what makes us different is that when we were both evaluating the business model, we found that a lot of the folks that are providing research have a.

[00:09:19] Colin Ferrain: And a bias for whatever reason, if you’re a sell side bank, you’re trying to get a banking deal. If you’re running a research site, that’s driven by ads. You often have relationships with the folks that are providing the advertising with you. So what we have built as a no pay to play web or platform for investment research.

[00:09:36] Colin Ferrain: And I think that sets us apart as being, you know, you know, skeptics and neutral among all the ideas we’re looking at.

[00:09:42] Bryan Fields: So before we dive into some of the. Do each of you have a favorite operator from like a large scale and a small scale that you’re kind of rooting for one, that’s kind of caught your eye, that you, you know, you have some information that you can share that just kind of gives some insight into some of the tremendous value that MJ research brings to the table.[00:10:00]

[00:10:00] Colin Ferrain: Yeah, I’ll start, but I’ll do a contrarian one to kick us out. Especially right now, the Cresco labs has been trading down pretty significantly. The capital structure is not great. The financial disclosures and accounting have been. Not great, but an operational standpoint, if you look at their organizational structure and their team relative to the other, MSOC, they’re about as mature as it gets.

[00:10:22] Colin Ferrain: These folks have an entire lean manufacturing division that’s going out and figuring out how to optimize processes from dispensary down to cultivation. And this is a team of 25 to. 35, um, across the entire, um, and GTI has a similar organizational structure, but it’s, I mean, honestly, it’s been mostly replicated from the folks across the street at Cresco labs.

[00:10:44] Colin Ferrain: Um, and they do really deep data analysis on every single decision that they’re making. Um, which I think is a unique differentiator. Whereas everyone else in the industry seems like they’re just trying to keep up with operations and it’s like, they’re gonna, like, they’re gonna throw a reverse osmosis [00:11:00] system in their cultivation.

[00:11:01] Colin Ferrain: Just because they don’t exactly know where the city water is testing that. And they think that that might be a fixed. Whereas you’re going to have Cresco labs is running individual pilots in a single grow room at each of their cultivation facilities. And then making that decision, which is something that’s always really impressed me.

[00:11:18] Mike Regan: So let’s say something you’re saying it’s something you really like, and you’re rooting for. I try to, you know, Try to always be independent on the, you know, I have, you have an investment thesis, it’s a good buy at this price. I think it can go to that price versus the agrees. And, uh, well, I’ll go into a little bit that, uh, we wrote up for our premium clients.

[00:11:37] Mike Regan: Couple of weeks ago when it was about 16 was a Weedmaps, which now is just the specs that we wrote about was still silver spike, but, you know, looking forward on it, when I first came out, I was very excited about it. Cause I’ve been looking for the, uh, you know, the NASDAQ traded ancillary company that has a good business model that can, uh, you know, at this point beyond, by [00:12:00] institutions, looking for cannabis exposure that can’t actually touch the plants.

[00:12:04] Mike Regan: Uh, and also it doesn’t have, you know, it doesn’t have a lot of, any of the questions around, um, you know, supply and demand on the plant side. And then when we met, just came out and, you know, we started writing up actually back in January. Um, and those are only riots are actually available. Uh, you know, they’re free.

[00:12:21] Mike Regan: You just have to sign up. The concern was always that the, uh, illicit stores that they had in the past and the, the investigations as to whether they were still aiding and abetting that, so first it was saying, you know, they removed all the stores back in 2019 in California that were unlicensed. Uh, and when we started doing our research, we actually then found that there was, uh, you know, some stores that seem to be, to take advantage of a C uh, like a CBD only loophole where the listing is CBD only.

[00:12:50] Mike Regan: But if you look around at other sites, you know, if it’s a store and say 1, 2, 3 main street CBD, there happens to be 1 23 main street, THC at the same address with the same [00:13:00] logo. Yeah, that’s the only THC on Weedmaps. So yeah, you’re not breaking any laws, but it looks like you’re, you know, it looks like you’re doing something else on the side.

[00:13:09] Mike Regan: Then it was like, this seems a little too risky because you can’t capitalize revenue that could vanish overnight. Right. If, if there’s a risk that, um, government cracks down and says, okay, you know, 300 of your listings have to be taken off immediately then, you know, investors don’t like that. And we actually discovered, uh, than a may was they seem to have actually cleaned up.

[00:13:30] Mike Regan: You know, all those, all those listings that we had originally found back in January were then gone. And then on top of that, they, uh, also remove the unlicensed stores in Canada, which should then if you actually do the math. All the Canadian revenue was unlicensed. So they basically abandoned all the Canadian revenue.

[00:13:47] Mike Regan: And that actually in my mind is a huge positive, because it shows that this management team is actually serious. They’re actually walking the talk essentially. So then that actually then lets it have a higher multiple, if the revenue [00:14:00] stream is truly clean in that respect. And it also forestalls that the investigation.

[00:14:06] Mike Regan: But the subpoena from, uh, you know, the, the DOJ, um, if they’re actually saying like, you know, the thesis is we’re a partner to the industry in terms of, or a partner to the regulators in terms of only having licensed stores. So then taking that risk away, then you’re just left with two-sided market, you know, high barriers to entry on that.

[00:14:22] Mike Regan: And There are markets where they dominate, you know, generating 25% margins where the pricing story that they’re both increasing the value and showing that their products are deliver more value to their customers and raising the prices on them. Which is a huge benefit for margin expansion. And then also the upsell on software as a service, the adjacent software technology that dispensary’s need.

[00:14:44] Mike Regan: So you combine that and then, uh, it’s also, you know, trades on the NASDAQ. Doesn’t actually touch the plant. Doesn’t pay 280E taxes today. You know, if I’m a big mutual fund that just wants to own a tech company that happens to sell to the cannabis industry, but it’s not a cannabis company specifically.

[00:14:59] Mike Regan: I can actually [00:15:00] buy it. You know, that all sets up for what I think is a pretty interesting long case. With a good business model that generates cash that is actually earnings positive after taxes. And, you know, Yeah. Still then benefits from, you know, uh, like the overall canvas long thesis of increasing penetration across the U S so the guide said, in a nutshell, we’ll go into sort of where I think the stock will go.

[00:15:22] Mike Regan: We, you know, I think you have something for the premium clients in terms of our actual upsides and downsides and the risks and the such, but that’s, that’s in a nutshell that, uh, I think that’s a pretty compelling case in cannabis right now in the cannabis sector. Although too.

[00:15:37] Bryan Fields: Long-winded no, I think that’s really strong.

[00:15:39] Bryan Fields: And I think you did a really good job of teasing at the end. If you want to see, you know, the other information sign up and we can plug the link right there in that moment. So I think you did a really good job there. So let’s kind of get into some of the trends that you’re seeing from a macro standpoint, obviously like you were saying, Mike, the cannabis injury has got a variety of different issues with Intuity, the state by state issue.

[00:15:58] Bryan Fields: So what macro trends are [00:16:00] you using to kind of overall guide the industry and kind of shed some light on that?

[00:16:06] Mike Regan: I just in terms of overall macro trends, I mean, it’s more understanding digital markets and, you know, sort of the individual margin structures of those on a macro basis. And this is more longer term that, you know, the trend has picked up recently, but I don’t think it ever really went away.

[00:16:23] Mike Regan: It’s just was dormant for awhile will be consolidation. Right. There’s you know, in 10 years there’s probably going to be fewer larger operators, at least in the public side versus. Yeah, the ones that we have today, uh, you’ve already seen, you know, truly is acquiring hardware. Um, and so instead of like, oh, this is, yeah, this means mega mergers are bad.

[00:16:42] Mike Regan: Cause like, I don’t think they ever really went away. It’s just the, the industry will consolidate over time. This one just happened to have happen. Now we have our own reasons why we suspect it happens, you know, on May 10th, specifically, you know, versus in a year or two years ago, uh, related to harvest capital [00:17:00] structure and voting structure.

[00:17:01] Mike Regan: But know that that’s just an overall trend of, you know, who is gaining increasing scale at this point. Has a benefit for access to capital in terms of the, you know, the large players typically have sort of better access to capital and at lower costs of capital. That probably won’t always be the case though.

[00:17:20] Mike Regan: Uh, you know, if we have increasingly realization or safe banking, you know, that’s more of a macro trend of, um, what levers within the companies actually start to change. Uh, and actually we just wrote this up about inflation and Canada. Cannabis generally has sort of, uh, the, the cottage industry nature of it and the nascent, goodness of it leads to opportunities long-term to improve with scale and new processes and automation, you know, a lot of, um, you know, they can probably cut costs a lot more.

[00:17:50] Mike Regan: And that’s more, a longer term trend that we’ve been looking at actually column. You’re probably better to speak about the, uh, you know, the, um, you know, the scalability questions, but, you know, we’re sort of looking at who [00:18:00] can operate efficiently. And that doesn’t necessarily mean who has the highest margins today because I could have a hundred percent margins tomorrow.

[00:18:07] Mike Regan: If I fired everybody. And June would be a great month, but then July would fall off a cliff. Right? You can’t operate a business that way. So it just because you have high margins today is, I mean that you’re necessarily going to be able to maintain those margins as your business gets bigger or as, you know, as the time changes.

[00:18:22] Mike Regan: So I don’t know if you want to reflect on some of those concepts.

[00:18:25] Colin Ferrain: Yeah, I’ll start with the macro trends that we’ve been looking into. I can note are the scalability and then supply demand. And so the scalability side is just that, I mean, you guys know as well as anyone that MSOE is at this point are much closer to startups than they are to establish public companies, um, like incumbents and industrials.

[00:18:44] Colin Ferrain: Right? So when you look under the hood at these companies, it’s just mayhem, you know, like they’re scaling quickly, they’re hiring quickly there. They’re acquiring companies and, you know, it’s just like from the outside, it looks really neat. And when CEO’s go and tell you, like we’ve got plans, [00:19:00] a, B, and C, but when you look at the inside and like, you know, going into the offices, it’s like people are flying all over the place, not enough desks for people type of structure.

[00:19:09] Colin Ferrain: And so you look at the scalability, it’s often that how disciplined are they being about making sure that their business grows because often. Dynamic, you have counter issue of making sure the business can, Gail is going to hurt your near term margins. And that puts this, you know, this like temporary bare thesis in front of investors, or they’re like, well, their margins are not nearly as good as X, Y, and Z, but in reality, they’re prepping for the next five years.

[00:19:31] Colin Ferrain: Whereas companies, X, Y, and Z are only prepping for today. And I think that’s really. Piece, they have to look at when evaluating these companies because you want to hold them for five to 10 years. There’s plenty of upside, um, as the industry continues to grow. Um, and so that’s one of the macro trends we’re looking at it’s everything from like, do they connect their ERP?

[00:19:49] Colin Ferrain: To, uh, their POS in the retailers, right? Like is the POS and the retailer connected to alive. Many of this got real integrations or are they basically selling inventory on their live menu that they [00:20:00] don’t have that there’s dispensary that picks off customers when they go to the store because the product isn’t actually there, right?

[00:20:05] Colin Ferrain: This stuff happens all the time. Then the other item is high demand where, you know, the companies that have the best gross margins right now are usually in states that have limited licenses. Flower prices. And so we’ve been digging into looking at the central supply in any given market, relative to the demand today, and then the demand five years from now.

[00:20:24] Colin Ferrain: So just assuming that the entire per capita population of an individual market say like Colorado, you know, scales to maturity and wherever that maturity is, Colorado continues to grow. So it’s kind of interesting to see that move on. But if you look at states like California, where we’re doing a deep dive on right now, The potential capacity of California, they could plant more cannabis than the entire state would need multiple times over.

[00:20:49] Colin Ferrain: Now it doesn’t necessarily equate it to low prices because not everyone’s putting plants in the ground and not everyone’s actually using their licenses, but if they wanted to, and as more legislation comes on to allow [00:21:00] more outdoor grows and greenhouses, and these perfect agricultural markets like, or sub markets like counties, Santa Barbara.

[00:21:07] Colin Ferrain: Uh, then sure. Uh, Monterrey, uh, Sonoma, um, that will change the entire direction of the pricing. And eventually there’ll be spine to the entire country, but for now it puts risk on the near-term pricing. I

[00:21:18] Bryan Fields: think that’s perfectly said, and I want to dive into Callan because I know we’ve been to some operators that are one of the largest in the space and been overwhelmingly surprised by the way they handled their business.

[00:21:28] Bryan Fields: And we kind of were blown away to think that like, these guys are doing tremendous numbers, we got in there and it’s like you were saying, colonnades, it’s chaotic. And we kind of looked at each other. And it’s one of those where we just kind of got like an inside look and just couldn’t believe how that was going through Kaelin.

[00:21:44] Bryan Fields: You want to shed some light on that experience and kind of piggyback off what Carl was saying. Yeah.

[00:21:48] Kellan Finney: That’s funny that you brought that up because that’s exactly where my head was at. And I was also debating, I was like, probably shouldn’t say the name of the company or anything like that.

[00:21:58] Bryan Fields: It’s

[00:21:58] Kellan Finney: completely, [00:22:00] it’s completely accurate.

[00:22:00] Kellan Finney: Right? Like we went into their facility and check it out and I was just like, What are you guys doing? I was like, this is a total dumpster fire. This is one thing you guys are not doing that. And I was like, all of this other stuff you guys already bought. No one unboxed it. It’s just sitting here in a corner and you’re outsourcing that.

[00:22:17] Kellan Finney: It’s like, what are you guys doing? It’s it’s, it’s absolutely insane. And just like you said, people are running around. They’re like, we don’t have enough boxes for the cartridges, like the throng cartridges, like this order was supposed to go out yesterday and they’re just all like, what do we do? And it’s, it’s just insane.

[00:22:34] Kellan Finney: And they need high quality people and the training and all these things are just so under appreciated and like in a, an established vendor industry where they have this system. Onboarding people and getting them trained and having them all check all these boxes and having them competent. Like all those systems are aren’t in place yet.

[00:22:54] Kellan Finney: And they’re all so fluid within these companies because they’re all still trying to figure it out because it’s not like there’s a, [00:23:00] a rubric for how you run, uh, a company that has. Operations and every different state, that’s a micro market. You know what I mean? So they’re, they’re having to figure this all out on the fly, which is clearly has been, uh, a challenge.

[00:23:16] Kellan Finney: You know what I mean?

[00:23:17] Colin Ferrain: Funny. Cause like, if you didn’t know them, you would have trouble imagining that they were multi-billion dollar

[00:23:24] Mike Regan: industry later.

[00:23:26] Bryan Fields: We kind of assume. That, that they’d be so much more put together and that none of these issues would arise. And then we kind of like took a step back and we thought about it.

[00:23:34] Bryan Fields: It’s like they’re scaling so fast that they’re not even able to consider it. Right. They bought us equipment because someone made that decision. And then it’s Callum said, he’s like, they’ve got a million dollar paperweight in the corner, just collecting dust. And they need that piece of equipment that they’re outsourcing because likely the person that made that decision got hired and moved on to the next role.

[00:23:53] Bryan Fields: And then the person that came in was like, I didn’t buy that. I don’t know where that goes. I mean, this is the part of the industry that kind of excites me the most [00:24:00] because unless you’ve been there and you don’t realize that, like that’s all easy money that they’re going to, once they get like in a rhythm and start optimizing,

[00:24:08] Mike Regan: I guess two other trends we see in the first is, you know, cannabis industry is not just, you know, people growing the plants and science dispensers, it’s the entire supply chain that will need to grow up along with this.

[00:24:20] Mike Regan: Like part of the reason that it might be so chaotic is that there isn’t the, go-to a normal company. Yeah, the go-to outsource or like, Hey, we need this to be done. Just do it. Okay, fine. They do it. There there’s a whole supply chain that hasn’t been built yet that needs to be built. So it will be all these other companies that, yeah, we don’t actually touch the plant.

[00:24:37] Mike Regan: We don’t actually, you know, we serve as the cannabis industry and help them better organize it. And then also just sort of how the margin structure changes. And this is more for investors that we try to think a lot about, you know, is, um, the margins you see today will probably change versus. In the future in terms of first it’s how many, how much you have to scale up that [00:25:00] infrastructure as you grow second is also what happens as, especially with too many.

[00:25:05] Mike Regan: I wonder if that is at least for the U S operators that are propping up some of the margins. Implicitly any margin has to sort of cover the taxes, right? So all of a sudden you take two 80 to way, you know, then it’s not like all that money just flows to investors and investors has get all that know the managing teams are going to look at it and think, well, okay, well now we’re not writing that check to the government.

[00:25:27] Mike Regan: What can we do with that? Instead, we can reinvest it in marketing re-invest and hire more people. Maybe even reinvested in, you know, either lower prices or, you know, eats in a competitive consumer industries. They quote, invest in price. The grocery stores do that all the time. And that basically it’s just a price cap.

[00:25:44] Mike Regan: So you know that if you take out that enormous cost to them right now, and then no one has. You know what I’ve seen in other industries like this happened in 2017 with the tax cut and jobs act. When, you know, the government is universally lower, the [00:26:00] corporate tax rate for everybody from like 35 to 21% businesses that had strong, you know, that weren’t very competitive and it bought back stock with companies that were in competitive consumer businesses and industrial businesses.

[00:26:11] Mike Regan: A lot of them just spent more money on the things they were already doing. Like they celebrate. Uh, strategic growth plans or they were forced to give people raises because like, well, you know, we’re, we’re reinvesting back in our employees where we are investing in price, we’re reinvesting in, you know, product quality.

[00:26:28] Mike Regan: And you know, it’s not like that money was just kept by it by investors, but since EBITDA, which is what the industry is usually valued at is a pre-tax measure. You know, you have this scenario. EBITDA margins go down net income margins or the after-tax margins actually go up. And it’s a question of our investors looking closely enough at that dynamic, because if you just need to kind of give a dumb margins, you’ll freak out.

[00:26:51] Mike Regan: They’re like, oh, this is terrible. Your margins are going down. I don’t want this. It’s like, well, they’re going down, but you’re making more money. So that’s actually a good thing. And our cost of capital is lower because. You [00:27:00] know, uh, tax cuts, the cheapest form of capital possible. Right? I don’t have to, the government is just not taking as much money.

[00:27:05] Mike Regan: Great. You know, I don’t have to like go, you know, pay interest to debt holders or dilute the equity holders with more shares. Right. So it’s actually all good, but not in the simplistic. Oh, you know, 21% of gross profit goes into my pocket, says the investor, that one. Yeah, nothing

[00:27:20] Bryan Fields: in cannabis is simple like that.

[00:27:22] Bryan Fields: So I want to ask a different question. Vertical integration. Does that help the operators you think, because we were talking about all the challenges with scaling, so vertical integration as a whole, are we in favor of it? And from an investment side, do you think it’s beneficial to be investors understand the challenges and the complications of being vertically integrated and having to have all these efforts and all these resources, and then the inability to kind of perfect a certain area of the supply chain.

[00:27:48] Bryan Fields: Colin, do you.

[00:27:49] Colin Ferrain: All, um, I might tease and then hand off to my ex. I think that there’s, there’s a bit of nuance that vertical integration is good for, from an investment standpoint and for operators right now [00:28:00] in the future. Won’t be. So at this point, you’ve got relatively wide margins across the supply chain.

[00:28:05] Colin Ferrain: You move from cultivation to processing, uh, cultivation, manufacturing to processing, to dispensary’s even. But eventually that gets more competitive. So there’s limited license, let’s back up. And these limited license, Stacey of vertical integration, you can sell from your cultivation to your retail or even doing in your cultivation to wholesale and make plenty of money.

[00:28:24] Colin Ferrain: Now you see margin compression. When you look at a competitive market like California or Oklahoma, even Colorado with the exception of this year where margins have gotten better back to a better place, but take California, for example. When the prices go down, you see margins get squeezed across the supply chain is generally starts further downstream and then works its way back up.

[00:28:45] Colin Ferrain: And you have a shakeout of operators, which is not obviously great for investors, but if you’re in Pennsylvania, you basically make money, hand over fist. Florida’s a better example, um, because you’re vertically integrated and because everyone else is locked out. And I think in the [00:29:00] future, as it gets more competitive, more players come into this space, more people are specialized, like.

[00:29:05] Colin Ferrain: A very low probability that someone that has operations in 12 different states. And has vertical integrations is going to be able to compete with a herbal in California. Right? It’s a super well run a business run by people that have former experience in food distribution. The idea that like someone will be able to compete for a core competency when that’s all they do every single day seems farfetched.

[00:29:30] Colin Ferrain: Um, so that’s my general take. Good for now.

[00:29:33] Mike Regan: Mike, the general concept is exactly it’s it’s, you know, thinking fourth dimensionally, if you will. It’s when, you know, when in the industry growth cycle is attractive right now, the lack of a reliable supply chain across the whole sector is what we were talking about before that there’s going to be this whole ancillary supply chain that needs to get built as well.

[00:29:52] Mike Regan: You kind of have to be vertically integrated because you know the one, one thing, that’s your bottlenecks, your products. If you can’t get it and you got to do it yourself, You know, [00:30:00] writing up that know Ford for model T’s during, after world war one needed to be vertically integrated. They owned forests and iron mines and railroads and glassware.

[00:30:09] Mike Regan: Yeah, because they were sick of supply chain disruptions, and there just wasn’t a reliable supply chain, but four, it doesn’t do any of that today because there’s an entire mature supply chain. Uh, we’re nowhere near that yet. So today, you know, having the, the benefit is having the greater ax, you know, guaranteed supply of product control over your quality, you know, and things like that.

[00:30:31] Mike Regan: Is more important than, you know, shaving an extra 5% off of the supply contract, but if fast forward and all of a sudden, if there’s robust wholesale markets or companies that specialize in each part of the supply chain, You know, when you have that specialization, they’ll probably be able to do it better and more efficiently because they’re, you know, like concept they’re really good at that one thing that it makes more sense to, you know, it’s cheaper and better just to hire the outsource this to the person who knows that, who knows how to do it [00:31:00] perfectly, but we’re not there yet.

[00:31:01] Mike Regan: And then, yeah, it’s also a lot of laws for us. And you can kind of get away with it because it is still micro markets, but you know, if all of a sudden you took away those micro markets, you’re going to see, I think a lot more specialization over the longer term. It says that’s a general answer, but it’s that’s I think where we’re going.

[00:31:18] Mike Regan: Over the long-term you only want to touch on that as far as vertical

[00:31:21] Kellan Finney: integration goes. I think the one area I look at it as more of a optimistic perspective. I think that vertical integration is really good for all these companies to approach right now because all of these different management teams are have strengths and they all have weaknesses.

[00:31:38] Kellan Finney: And I think in 10 years, They’re going to figure out that, Hey, our team is really, really good at this section of the supply chain. Right. And then they’re going to cut the fat and then that’s going to help establish. That robust ancillary wholesale market and that supply chain for outsourcing. Right. And you’re going to see all these companies kind of just go [00:32:00] and fit into what they’re really good at.

[00:32:02] Kellan Finney: Right. And so if they’re doing everything and they find out, Hey, we have employees that are absolutely phenomenal at understanding purity of water and all these things, right. From a cultivation perspective. And then they double down on that and then they start outsourcing the other things. I think that that’s going to be really, really strong for the whole industry as a whole.

[00:32:21] Kellan Finney: Right. And so I think that you’re going to see more and more companies start to. Put resources into the areas that they’re really skilled at, right? Whether that’s retail production or extraction, or if it, or cultivation, or even some of the ancillary services like Weedmaps and other companies like that.

[00:32:39] Kellan Finney: Right. And so I think it’s really good for the industry. I think it. It’s tough now, though, because these companies are forced to do things on their own and it’s going to significantly affect the margins because they aren’t as good at it as say another operator or a company down the line in 10 years.

[00:32:56] Kellan Finney: Right. And it also makes it really, really bad. Well, what are your [00:33:00] thoughts on vertical integration? Brian? I

[00:33:01] Mike Regan: think

[00:33:02] Bryan Fields: everyone said it perfectly here. I just don’t think people outside the industry realize actually how challenging that is in Collin. You lightly touched on that when you have all different states with all different regulations and you’re trying to be vertically scaled the challenge and the complexity of being good at everything is really, really, really hard at the end of the day.

[00:33:20] Bryan Fields: Right? Supply chain disruption. If you don’t have flour, And you are not controlling spiking, you’re not selling fire products. So at the end of the day, you kind of have to, and we all agree. And I think that’s part of the excitement that I personally have is that once some of these challenges are lifted off these operators and they can really double down on what you were saying on, on what they’re good at, you’re going to see kind of the best of the best kind of move to the forefront.

[00:33:42] Bryan Fields: And then at the end of the day, you’ll see those numbers kind of follow suit. But right now we’re all in agreement kind of has to be the way it has. Good now bad later. Well,

[00:33:50] Mike Regan: I guess the interesting part of that trend we’ve noticed recently is the larger operators are trying to invest more in cultivation.

[00:33:58] Mike Regan: Surely just. [00:34:00] Uh, whether they’re in the process of buying Los Suenos, which is the largest cannabis grower in Colorado is a giant outdoor farm in Pueblo. And that was interesting to me. You know, if you look back a year ago, you had clearly fought blue kudu, which was a little edibles, kitchen and processing.

[00:34:18] Mike Regan: It wasn’t a, by the blue kudu, random guessing it was just buying the assets and the distribution that they had in 200 stores at the time. It’s probably more now to basically convert that, to select a block of this library. But like if someone in that company has decided we need to have a better the supply and they bought the largest supplier that, you know, I think to date has been mostly wholesale.

[00:34:39] Mike Regan: You know, they sold most of their goods wholesale to other growers. You know what happens when clearly, you know, then bye. That largest supplier are they, are they looking to basically sell wholesale in Colorado or are they looking to guarantee supply? You know, H how much of that supply is just going to go into select, uh, he basically goes into the blue [00:35:00] kudu kitchen and then just pump out select products for the Colorado market.

[00:35:04] Mike Regan: I’m not sure, but it’s know it’s interesting in that we’re, we’re seeing this trend of additional people investing in additional larger scale cultivation stuff, Columbia care, uh, by that giant greenhouse in long island, uh, you know, in glass house, coming public by the stack. That’s, uh, you know, they’re going to have a giant.

[00:35:24] Mike Regan: I think they’re basically a converted giant greenhouse in California. It’s then blow out that more in a retail wholesale, you know, joints, a joint thing. And that goes back to the whole over time. You’re probably going to see greater scale. And the question is the larger operators that have probably better access to capital right now consolidating a bunch of smaller growers.

[00:35:45] Mike Regan: Then you’ll have, you know, that that can be the step function. In sort of margin and capital availability near term and the longer term, how much cultivation do they want or need. Um, but that’s a far longer term question. There’s plenty of [00:36:00] cultivation to consolidate in the near term better

[00:36:03] Bryan Fields: to have and not need the need and not have, and kind of when you relate it back to the pandemic, when you’d go to the food store and there’d be nothing left, but a couple like leftover pieces of bread and people are like, well, I guess this will do.

[00:36:13] Bryan Fields: Sometimes it feels like when people go to dispensary and they’re out of products and there’s like a couple of random pieces left. People are like, well, that’s perfect. Like I w I came here, I waited in line for two hours, like, and this is all that’s left. Perfect. I’ll take that in right now. Like, we don’t really know what the demand of cannabis is.

[00:36:27] Bryan Fields: We just know it’s more and more, but let’s go into another trends. We talked about the trends that you’re seeing. Let’s talk about trends that you’re not seeing, that you’d like to see what type of trends are out there that you think we’ll see. Fine. I guess

[00:36:42] Colin Ferrain: it’s an easy segue, like trends that we’d like to see soon would be more operators focusing on their core competencies.

[00:36:49] Colin Ferrain: So as Kelly mentioned, like that’s a great point that a lot of these folks that you’re starting to see who wants to be good at what. Sometimes we’re even seen who’s good at what, [00:37:00] but it’s not always the same. And so when you look at me, like, excuse me, securely, right? Does anybody really want to own a outdoor farm instead Colorado now?

[00:37:10] Colin Ferrain: Probably not, but if you can sell your products at a price competitive rate to go and get market share and get more distribution doors because you want to build a bridge. And it’s super, super valuable. And that’s exactly why clearly if it’s going out there. So yeah, at this point in time, it’s kind of like a necessary evil to go out and find these certain types of assets, because at the end of the day, like there’s a ton of variables you guys know, as well as anyone given exposure to Colorado, that like, it’s, we’ve got really tough weather to forecast and it’s like the growing season is long, but like the idea that, you know, the chance of you having a snow storm in September is not low and you’re literally out there hand picking.

[00:37:50] Colin Ferrain: Far at that point, like the day before the snow storm comes, cause you only had a day of warning coming back to the point though, seeing folks that go into focusing on their key [00:38:00] competencies, um, which you’ve seen, I think he’s like Cresco with wholesale. Um, they’ve shown that they really want to focus.

[00:38:06] Colin Ferrain: Pushing wholesale and getting distribution doors. Um, and that’s fine. And that’s great. There’s a place in the market for that. I think you’ve historically seen like juicy focused on retail. That’s starting to turn a little bit because they want to build margins. And so they start to get more cultivations, but I’d like to see more focus on core competency going forward.

[00:38:24] Colin Ferrain: And I realized that it’s not especially rational at this point because you have to own across the supply chain, but it will be interesting to see how that pans out.

[00:38:33] Mike Regan: Mike. I basically think of two of them, the first one. And we’re starting to say this, but, um, I mentioned before is just the complexity of the capital structures with so many warrants and options and converts that I think the overall industry will benefit when those capital structures are simpler and the share counts are simpler from just higher multiples as, uh, you know, at this point that I guess mostly investors.

[00:38:58] Mike Regan: I don’t know, or [00:39:00] they’re close enough to that. They’ve already done all the math, but as this industry courts, more and more institutional investors, it’s a question of whether they’ll be able to sort of Wade through these very complex. And it’s more of the dynamism of the share account, right? The share count changes as the stock price changes, right.

[00:39:16] Mike Regan: That’s based on what the warrants do. So, you know, if you’re doing evaluation on a company, you know, you think there’s a hundred million shares. We have, there’s a hundred million shares at $10. When the stock doubles the $20, all of a sudden there’s 15 million shares. And all of a sudden it’s not $20 anymore.

[00:39:32] Mike Regan: It’s, you know, it’s $15, something like that. Right? The industrial benefit overall, it takes them. They can use less and less issue, less and less warrants on future, a capital raises. And again, that’s been impacted. The capital constraint nature of the sector. So it’s slowly happening, but that, I don’t think it will benefit the industry.

[00:39:52] Mike Regan: I think, you know, more traditional companies in their supply chain aspects, you know, we’ll start to see more traditional companies start to look at [00:40:00] supplying this space as just another customer. You know, I guess the, the, the money laundering laws and the banking laws that can complicate things and you know, or the insurance, you know, you may be perfectly legal to decide, but you call up your insurance agent and they’re like, Well, if you supply this cannabis company, all of a sudden your insurance rates are going to quintuple because you know, this is crazy risky for us.

[00:40:20] Mike Regan: We’re not going to let you do it. So it’s effectively, you know, effectively can’t service them. I think that’s a trend I like to see. Change is just the industry gets more, you know, you have more normalized, just like it’s just a standard consumer pharma product. It’s going to have a whole agricultural industrial supply chain, just like any other business.

[00:40:40] Mike Regan: And it needs to be supplied by, you know, you do the exact same thing for soft drink company. Why can’t you do it for, you know, this cannabis company, right. I think that’s coming. And that’s the trend of like, it’s I like to see more of that. And I think you’ll, I think you’ll see more traditional companies start to get involved in the space.

[00:40:57] Mike Regan: Can I

[00:40:57] Colin Ferrain: add one more? [00:41:00] This is not investment based, but lower THC product. We don’t all need to have 25% THC flower or a hundred milligram THC drinks. This is gotta be a thing of the past. And as we get more people that are new to the industry and it becomes a liability more than anything, right? Like a 10 milligram piece of chocolate, just breaking down.

[00:41:24] Colin Ferrain: But less THC in it, more companies will have more log cans shown that that, that, that can happen. I realized there’s barriers to the idea, but, uh, it’s gotta be something that happens in the near future for the CPG companies.

[00:41:35] Bryan Fields: It’s another conversation for another time, because in some people’s mind more is always better.

[00:41:40] Bryan Fields: Right. And when you are first time into a dispensary and you’re not really sure. The higher, the number, the more attractive it is. And sometimes the budtender is more likely to recommend it. And then you’ve just got yourself with circle of issues because whose role is what, and that’s a whole another conversation for another time, but I want to kind of quickly switch gears and go back to the margins conversation.

[00:41:59] Bryan Fields: We talked about kind of [00:42:00] comparing operators. And margins is, uh, an easy way to likely do that, but sometimes it’s very misleading. So in your opinions, can you compare operators in the cannabis space solely by margins? And if not, you know, what sort of other initiatives, if you’re new to this space, would you use to kind of compare operators to make.

[00:42:19] Bryan Fields: And investment into that space. I

[00:42:21] Mike Regan: think you start with margins, but then it’s understanding the stories behind why those margins are the way they are, because you have a low margin for two reasons, you can have a low margin because you’re investing for the future. So if you sort of break it into, well, my, you know, my sustainable margin is, you know, I haven’t been make up numbers here that, you know, 30, but I’m investing 10% of sales for this infrastructure in the future.

[00:42:45] Mike Regan: That’s why it’s 20. That’s a very different story than. Yeah, our product just doesn’t have very good branding power and we just have to keep cutting prices. Because our product sucks and that’s how we compete. You know, that that’s a [00:43:00] very different reason of why are you at 20% margin instead of 30 just to make up around numbers, right?

[00:43:04] Mike Regan: Yeah. That would require us like billing in and understanding, you know, what is the largest structure? Why is it that way? Uh, and then con I’ve talked with this also just properly adjusting for them because, and this may also be a trend for the overall industry. They would all benefit if they, you know, try to show their.

[00:43:21] Mike Regan: Yeah, try to report their financials and, you know, sort of as clean a way as possible. And more information is always good to make. Let investors make more adjustments. As they see fit. Um, but sometimes, you know, the headline, you know, adjusted EBITDA might include things that investors would be like, well, is that really one time should really be excluding that, you know, are you just, that’s sort of a trick and it’s not just cannabis.

[00:43:43] Mike Regan: A lot of companies will do that. They’ll throw recurring things into the one timeline it’s like, wow, your one-time expenses are always. Something big, the individual thing, maybe one time, but like, you always have a big one-time expense. I’m just going to keep that recurring. Right. So that’s, it comes down to understanding [00:44:00] why they are the way they are.

[00:44:01] Mike Regan: And then I think monitor charm, you know, comparing it to what similar industries do that aren’t even in your same space, right? If you know, most consumer companies earning more, only 20% margins. How sustainable is a 40% margin. Well, you know, that’s the question and then saying, okay, well it’s different because of this, this and this.

[00:44:20] Mike Regan: Okay. Well, this probably goes away. This may change and this actually may be permanent. So maybe it’s, you know, 30, I mean, I’m just throw around round numbers, but that concept of what’s the story behind them. I mean, you do ultimately have to compare them both on the level, but also the sustainability.

[00:44:36] Mike Regan: Right. That’s what I think is most important from like an investment standpoint is it’s great what they are, but what are they going to do?

[00:44:42] Colin Ferrain: Yeah, I think that’s, that’s a pretty inclusive answer. Um, you know, we would add that, like we, we were, we do checks. Behind the margins of the more qualitative items, you know, like who are employees turning over?

[00:44:55] Colin Ferrain: Are they, uh, recruiting other employees from competing MSOE? How is [00:45:00] talent acquired basically or lost? Um, where are they investing on their infrastructure side, whether it’s capital equipment or they’re investing in technology platforms to make, as we talked about before the scalability, everything more efficient, and then generally, how do they make decisions, which is a tough one to gauge because he kind of.

[00:45:16] Colin Ferrain: The speaking with the, the core operating team, because generally from the executive team, you get like a pretty templated answer about stuff like that, but you can kind of parse a lot of the takeaways out of looking how historically they’ve made investments in the past. Um, yeah. Then even how they shape those investments in the public view, because obviously there’s always a deeper read than what’s in the press release.

[00:45:39] Bryan Fields: Yeah. I think those are both really well said. And I think that’s exactly the value that, you know, your team brings to the space. So I would encourage anyone. Who’s kind of interested in learning about the industry to kind of dive into MJ research platform and to kind of get involved. Right. Because the only way to really know is to work with experts like yourself to kind of go there.

[00:45:55] Bryan Fields: So before we go into prediction time, we ask our guests a couple of different questions. We’ll start with [00:46:00] you. Biggest misconception in the cannabis space. Other

[00:46:04] Colin Ferrain: some is quite a bit in the podcast. It’s, uh, that these billion dollar industry leaders are all buttoned up and smooth sailing and it operates like apple or, you know, some other big industry incumbent.

[00:46:18] Colin Ferrain: Um, I think that is misunderstood to say the least.

[00:46:23] Mike Regan: I guess from an investor perspective, I guess maybe see sometimes this more on the, some of the companies themselves, but you know, that the cannabis industry is its own unique thing, has its own special valuation metrics and special things. As I see it, it’s, you know, it’s a rapidly growing growth industry, but it’s still, you know, a consumer products with, you know, like capital intensive supply chain that needs to be built out, uh, in a capital intensive business.

[00:46:49] Mike Regan: And. You should view it within the lens of whatever that, of the consumer or industrial or cultural portion that, you know, you have to figure out which individual [00:47:00] company is actually what it has more or less of each of those things, but it’s not like cannabis is really special because of this. This is one of the business standpoint, um, to be clear, you know, it’s, it’s a consumer product it’s rapidly growing, but if you’re going to do evaluations, you should look out to when the growth slows down.

[00:47:17] Mike Regan: So look out five or 10 years, and then. Yeah, but normal consumer multiples on that five or 10 years out and then discounted back, but it’s not like, oh, you know, this should trade it 50 times revenue because it’s cannabis. It’s like, no, that’s no one should do that analysis of like, oh, I think I’m going to go to 55 times revenue.

[00:47:35] Mike Regan: The reason you do that is because. Yeah, we’re putting a normal consumer multiple on the far out growth and discounting it back implies 50 times a day, but it’s really just, you know, three, four or five times revenue or, you know, a more reasonable net income PE of 20 times PE on my 2013. Estimate, right.

[00:47:56] Mike Regan: That’s how it should be viewed. And that’s how we try to view it as, you know, whether [00:48:00] you actually do okay, you cultivate a product and then you process it and then you sell it in a retail establishment. You know, how has that compared to other companies that do something similar,

[00:48:11] Bryan Fields: some of your experience into a main takeaway or lesson learned to pass onto the next generation?

[00:48:20] Bryan Fields: Or would that be all experience? Yeah. Like any experience, something that you’ve learned in the cannabis industry, that for the next generation you wanted to pass on a lesson, something that a wide-eyed freshman walking into a college, who’s eager to get into the cannabis industry and they’re ready to start their career when they graduate.

[00:48:36] Bryan Fields: What lesson have you learned or main takeaway that you’d want to pass on to them? Something that you could share as like a guidance lesson. I’ve

[00:48:44] Mike Regan: got two sons. They’re not quite college age, they’re nine and 11, but I try to do that every day in terms of like, how am I, what am I trying to teach these kids to prepare them for the next 30 years?

[00:48:54] Mike Regan: And it’s, I don’t know. My general concept is to think critically for yourself. [00:49:00] Study history to see what has happened before, because human behavior tends to, I think, repeat itself or, you know, people tend to operate and pattern. So we get good at pattern recognition, but also think critically for, you know, don’t just be stuck with certain analogs of the past.

[00:49:14] Mike Regan: Like, oh, this Amazon was like, oh, alcohol is prohibited and then went legal. It’s going to look exactly like that. You know, that can be a model to help you to think about will happen in the future, but you still have to think critically. Yeah. And I guess the other key lesson is just to always try to disprove yourself, right?

[00:49:30] Mike Regan: It’s the logical concept of like the, what the black Swan example, you know, the thousandth white Swan doesn’t prove that all swans are white. It’s that the one black Swan disproves that all swans are white. So try to find the thing. If this is my hypothesis, what would this prove it? And then look for that.

[00:49:48] Mike Regan: But those are the general lessons I think, apply in sort of any environment and helps you react quickly to the macro hand that the world, these deals. Well,

[00:49:59] Colin Ferrain: I [00:50:00] don’t think I’m going to top a, seem to lab analogy, life experience. I’ll go higher level. Uh, just cause I don’t want to compete, but I think it’s, you know, it tends to be like that stereotypical phrase of like, you know, building your network is I think network is net worth.

[00:50:16] Colin Ferrain: Right. Um, but what I’ve learned, especially through like coming through equity research and then getting into the cannabis industry is always that there’s always someone that’s smarter than you. That’s going to be able to provide you. A ton of information that will shortcut your ability to get to where you want to go, whether it’s in a career or a life decision or whatever it is.

[00:50:35] Colin Ferrain: And if you are proactive on reaching out to those folks more often than not surprisingly, they’re willing to share their advice. Then, you know, I think he realized that as you get older and older, but like being able to find those folks that were, are willing to just help, despite even like, not necessarily having a full relationship with you first off, it builds a relationship, but then second off it gets you to where you need to be much faster than if you were to [00:51:00] go out and try and do all of the digging on your own.

[00:51:03] Colin Ferrain: Um, so I found that valuable both in cannabis, but then also just, um, having like Cheryl mentors from my past roles at all their companies. And it’s been super.

[00:51:13] Mike Regan: Those are two of my favorite answers that

[00:51:14] Bryan Fields: I’ve heard so far since we’ve done that last time, either of you have consumed any cannabinoids. Um,

[00:51:20] Colin Ferrain: last weekend I tried the cookies pancakes.

[00:51:27] Colin Ferrain: Uh, pancakes. I actually have it right here. It’s sitting across my desk, but yeah, it’s called cookies, pancakes. Um, I’ve never tried cookies before, so I just wanted to see what it’s all about. That is relatively new to Colorado, I think like last year. Um, and I know the farm that’s been growing the strains.

[00:51:43] Colin Ferrain: Um, so. Tastes sweet. Um, maybe like pancakes maybe might be a self-fulfilled taste, but otherwise good.

[00:51:54] Mike Regan: Let’s say you think about a week ago. I, uh, I had an edible, uh, like a little gummy, [00:52:00] uh, you know, it was, it was fine. And then went to sleep soon as afterwards and had a nice, nice sleep. So nothing crazy. The sleep edibles are the hypothetical smoking up with Trane associates, which yeah, from the beginning of that, we’ll say it better becomes a reality, the full circle experience.

[00:52:21] Mike Regan: All

[00:52:21] Bryan Fields: right. It’s prediction time, 2030, which big operator outside of the cannabis space has now entered the cannabis space and taken a big.

[00:52:32] Colin Ferrain: Are we talking operators to

[00:52:34] Bryan Fields: ancillary? Yeah. So it can be anyone that’s outside currently outside the cannabis space that has aggressively moved in to try to claim some market share in any of the verticals or any of the revenue opportunities in cannabis.

[00:52:47] Colin Ferrain: I’ll go first. I’ll do a, maybe a sleeper and then. Obvious sleeper. I think Mike and I have gone back and forth on this, but we’re going to see packaging companies live in this oligopoly of like five [00:53:00] that own the entire market share. And the idea that someone’s going to innovate something completely new and special when these guys have been doing it.

[00:53:10] Colin Ferrain: Decades or even longer, um, seems like it’d be really, really tough. And so I expect, I fully expect that, um, you know, the balls of the world will be going in and taking a run on all things, packaging, especially given that you’ve right now, you have. Just so much just like wasteless plastic. And it’s really hard to build a packaging company in the first place because molds costs a ton of money and you can’t really raise startup capital for it because it’s a relatively low margin business.

[00:53:37] Colin Ferrain: So I like that one from the outside. And I would say like the, I’m not sure the CPG company just seems like a, like too, too easy. So maybe I’ll hand off to Mike I’ll, you know, I’ll come back. I think of a better one.

[00:53:51] Mike Regan: Big alcohol and probably big pharma with the caveat that this all depends on what future regulations,

[00:53:58] Bryan Fields: 2030, no.

[00:53:59] Bryan Fields: Which [00:54:00] one w if you had to take eight company

[00:54:02] Mike Regan: is soon by 2030, you know, there’s general legalization and interstate commerce. Then you will look for someone with large distribution capability. Uh, the obvious one, there is Amazon. I’m not saying that Amazon is a cannabis stock by any means at all.

[00:54:23] Bryan Fields: Um, we’re going to remove them.

[00:54:27] Mike Regan: I’ll say like, you know, go by Amazon for the, you know, the cannabis long-term option opportunity. That’s insane. Testing their

[00:54:35] Colin Ferrain: employees though.

[00:54:37] Mike Regan: Well, that’s the thing, right? But here’s the thing, that’s my point. Exactly. That is actually significant in that like, look, they see what is Amazon. Amazon is basically a distribution platform of stuff to your house and they just want to get more stuff.

[00:54:53] Mike Regan: Through their pipes to your house. So. That actually makes [00:55:00] perfect sense. Assuming the laws go that way and you know, they’re already set up for it. It’s just, it’s just another brown box to them. Right. So yeah, the larger companies moving back side of these on GM also is not going to, you know, test for cannabis anymore, which I think is a positive that’s part of the whole normalization angle.

[00:55:17] Mike Regan: But so that, you know, that, that comes a little bit again. I also assume. It makes a million assumptions between now and nine years out of how long has actually happened. Right. But that’s probably one. And then I think this is one of the supply chain aspect. You’ll see, more sort of just traditional, you know, traditional companies having like, oh, when we have a lot of the cannabis division, it’s just even just an agricultural division that, you know, we here’s our five.

[00:55:41] Mike Regan: Divisions. We’ve got our oil and gas division and we’ve got our aerospace division and now we’ve got our plant division, right. Like, which encompasses everything. You’ll see stuff like that. But I guess that’s less sort of like the one company I’ll get into it, but there I’ll throw in Amazon because.

[00:55:56] Mike Regan: They’re already, they are involved in everything. Now, why wouldn’t they be in the [00:56:00] future? Right.

[00:56:01] Bryan Fields: Amazon was the one

[00:56:02] Kellan Finney: I was going to say, so, but I had a backup one just cause like, you know, they’re going after the healthcare industry, like Amazon’s goal is to conquer the whole world and you cannabis is part of the world.

[00:56:12] Kellan Finney: So like, um, I think Uber, Uber or Lyft, um, I know that delivery has high margins and I think it’s a really, really attractive. Business in the cannabis space, right. Um, from a startup perspective and Uber already has the platform and the software and the drivers. And just like Mike was saying, it’s just another brown box to Amazon.

[00:56:35] Kellan Finney: I think that to Uber drivers, it’s just another trip that they can make some money on is same with the food delivery that they launched a couple of years ago. So I think Uber is, is going to be a mainstay in the delivery space of cannabis. Um, by 2020.

[00:56:51] Bryan Fields: I’ve other my third choice, uh, obviously Amazon and Uber are my go tos.

[00:56:55] Bryan Fields: And for the reasons you’ve said, obviously it makes a ton of sense for both of them to be in this space. [00:57:00] And it’s just another addition into whatever they’re doing well. And obviously the theme of this podcast has been understanding what your unique selling point is in both those companies, understanding nextly, what they do well, and you can provide a NASA of added value to the industry and kind of take off the burden to the operators because it’s just an additional headache for them at this moment.

[00:57:18] Bryan Fields: So. If I were going to choose a company, I would choose Johnson and Johnson. I can likely for the sleep aspect of it, obviously people that need to relax, go to some sort of products. Sometimes alcohol. And from a sleeping standpoint, if, if there can be some advancements with the CVN and some sort of compassion to help people go to sleep, then obviously these, these large scale companies are best positioned with their assets now to take advantage of that.

[00:57:43] Bryan Fields: And I think that’ll be the easiest way to adopt, I think from a mass consumption standpoint by 2030, I don’t think it will be heavy THC personally. I think it will be one of these other minor cannabinoids that it just becomes a mass adopted and is looked at as like. Vitamin into the asset, into the body.

[00:57:59] Bryan Fields: [00:58:00] So that’s my standpoint, gentlemen, before we wrap, tell our listeners where they can learn more, where they can get involved and get some of this information from MTV.

[00:58:09] Mike Regan: Uh, well then you can go to our website, which is M J research co.com. Uh, so MJ research, CEO, uh, dot Tom, and Matt has, uh, all of our research is up there, uh, where you can sign up to be a free member where it gets some free stuff.

[00:58:27] Mike Regan: And then, uh, also the premium sign-ups, uh, for the real media analysis that we provide. If, you know, if you’re, uh, an actual institution, we also offer an outsourced analysts, you know, higher fee bespoke research service as well. That’s that can all be found there and free members could sign up for our, uh, our regular email lists as well as sort of a newsletter type thing that we, we publish for everyone

[00:58:52] Bryan Fields: for free.

[00:58:53] Bryan Fields: Yeah. It’s one of the few ones that I consume on a regular basis. So I appreciate all your guys’ hard work and look forward to connecting soon. We’ll link [00:59:00] all the links. Thanks for your time. Thanks

[00:59:03] Colin Ferrain: so much. Appreciate it.

[00:59:05] Mike Regan: Okay.


Thanks so much for listening to The Dime . Subscribe or follow us on Seeking Alpha, Libsyn, Apple Podcast, Spotify, Google Play or Stitcher. And we’d really appreciate it if you could leave us a review on Apple Podcasts. It helps others find our show.

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What Is The Real Cost Of Converting Your CBD To Delta-8- THC?

Often derivative products are taken at face value when being compared. Currently, this is the case when we speak with operators about CBD and Delta-8 THC. The decision-making process always centers around comparing the price of 1 kg of CBD isolate (~$533.00 / kg) to the price of 1 kg of CBG isolate (~$1,150.00 / kg), which at the surface shows the potential to double the gross revenue.

Once you dive into the hard costs of converting your CBD inventory to Delta-8, the story changes dramatically. Below, we go through a calculation that takes into consideration a variety of variables when calculating the costs of converting CBD. The fixed costs in this calculation are based on conversations we had with an R&D research chemist working at a licensed facility in Colorado.

What Is The Real Cost Of Converting Your CBD To Delta-8?

What Is The Real Cost Of Converting Your CBD To Delta-8?

Based on our calculations, there’s still room for Delta-8’s price per kilogram to drop before the conversion becomes unprofitable. Our model suggests that, on this scale, the breakeven price per kilogram is around ~$923.00. Based on our forecast published in last month’s report, this could happen as early as May of this year. We advise our clients not to keep large inventories of Delta-8 in house due to the current Delta-8 pricing volatility.

Input Categories Assumptions
CBD quantity (kg) 10
Market value of CBD isolate $ 533.00
Total cost of CBD $ 5,330.00
Solvent quantity (Liters) 15
Total estimated solvent cost $ 1,400.00
Catalyst quantity (grams) 50
Total estimated catalyst cost $ 50.00
Total estimated labor cost* $ 500.00
Total analytical testing cost   (QA / QC) $ 300.00

NoteS:
*Labor cost is estimated based on 20 hours
of labor @ $25.00/hr
**Conversion yield is calculated after conversion,
work up, and purification to final product.

OUTPUT Categories Assumptions
Conversion yield* 85%
Delta-8 THC quantity (kg) 8.5
Market value of Delta-8 THC /   kg $1,150.00
Potential Revenue
Estimated Profit
$ 9,775.00
$ 2,195.00

Total Input Cost = ( Cost of CBD + Cost of Solvent + Cost of Catalyst + Labor + Analytical Testing )
Potential Revenue=( (Percent Yield from Reaction * Input Quantity of CBD) * Delta-8 Market Value )
Estimated Profit = Revenue – Input Cost

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

In this episode, Bryan Fields (Twitter: @bryanfields24) and Kellan Finney (Twitter: @Kellan_Finney) sit down with Dr. John Abrams, The Chairman, and CSO at The Clinical Endocannabinoid System Consortium (CESC), to discuss:

  • What and who is The CESC?
  • What is the endocannabinoid system?
  • Receptors in the human body
  • Research that’s currently underway to illuminate how to properly use cannabinoid products
  • Introduction to The Dosing Project
  • Understanding how cannabis interacts with the human body
  • Future studies that The CESC will dive into

About The CESC: The CESC is an experienced committee of scientists who hold the passionate belief that the pursuit of knowledge involves the collaboration of diverse communities.

Website: thecesc.org

Twitter: @TheCESCorg

Facebook: @TheCESCorg

LinkedIn: The Clinical Endocannabinoid System Consortium (CESC)


The Dime Episode 57 Transcript: The Leading Non-Profit of Cannabis Science Research ft. Dr. John Abrams Chairman of The CESC

Dr_Abrams edited

[00:00:00] Bryan Fields: This is the dime, dive into the cannabis and hemp industry through trends, insights, predictions, and tangent.

[00:00:10] Bryan Fields: What’s up guys. Welcome back to another episode of the dime as always. I’ve got my right hand, man. Tell him Finney here with me. And this week we’ve got a very special guest, Dr. John Abrams, chairman and founder of C E S C.

[00:00:22] Bryan Fields: John. Thanks for taking the time. How are you doing today?

[00:00:25] Dr. Abrams: Oh, I’m great. Thank you for providing the opportunity. I’m looking forward to this discussion.

[00:00:30] Kellan Finney: How are you doing? Just enjoying another sunny day out here in Colorado. Cool.

[00:00:35] Bryan Fields: Ready to dive in. So John, before we get started, Tell our listeners a little bit about yourself and how you got into the cannabinoid space.

[00:00:44] Dr. Abrams: I have been interested in this field for over 50 years. I’ve come from the bay area. I grew up in Palo Alto and this was starting to become common cannabis use. As I was in late high school. It was one of the experiences that we add [00:01:00] and it has been part of my life ever since I’m a biochemist and I’ve been in biotech and pharma for a good part of my career, the major part of my career.

[00:01:11] Dr. Abrams: And this has been an under a theme or a, you know, in the background until perhaps the last decade, when I decided I would really try and understand. The bases of cannabis science, the cannabinoid industry, and most importantly, how cannabis can unlock the human potential and understand the cannabis mind.

[00:01:38] Bryan Fields: Let’s kind of dive into that and you’ve accomplished many, many things in your career here. So the CSC, what is it?

[00:01:46] Dr. Abrams: Can you start that? So the CSC is an acronym for the clinical endocannabinoid system consortium. It’s a nonprofit, a 5 0 1 C3 type of [00:02:00] corporation that we started about five years ago. My illustrious clinical colleague, Dr.

[00:02:05] Dr. Abrams: Joel tolerant, whom will also be on this podcast at a future point. And I started recognizing that to be in. Healthcare space to be able to get grants donations and all it’s felt best. And the best structure was to be in a non profit format. In choosing the name. We decided that we were focusing on the endocannabinoid system.

[00:02:34] Dr. Abrams: We were taking a medical approach, thereby clinical endocannabinoid system. And because we’re intensely focused on the need for collaboration. And partnership and sharing. We looked at this as a consortium. And so our name says it

[00:02:51] Bryan Fields: all. I know cannabinoid system, for those who are maybe on familiar, can you kind of shed some light on exactly what that is?

[00:02:57] Bryan Fields: It’s a,

[00:02:58] Dr. Abrams: another system, [00:03:00] another physiological system that has been. Recently described and discovered as we, first of all, came to understand the structural and chemical basis of the prime active ingredient in cannabis, namely tetrahydrocannabinol or THC. As, and this discovery was pioneered by race.

[00:03:22] Dr. Abrams: Mushu long back in the seventies. I believe along with that, then a couple years later came in understanding of what receptors that is. If the THC is a key, then the receptor is the lock that, that key fits into to unlock. Physiological signaling. These are components then of a larger system, which has become to be called the endocannabinoid system.

[00:03:51] Dr. Abrams: It has also evolved our understanding to include the natural ligature, the natural compounds that our own [00:04:00] bodies. Right. That trigger and function in this system. The endocannabinoid system is like any other system we might learn in biology, the circulatory system, muscular skeletal system reproductive system.

[00:04:15] Dr. Abrams: It’s a, another collection of ligands Keys and receptors lock and binding entities, binding protein. It’s a whole system that we need to understand and discover, and it is majorly influenced by phytocannabinoids as opposed to our own indogenous logins. Endocannabinoids phytocannabinoids are produced. By the plant, the cannabis plant.

[00:04:43] Dr. Abrams: And that was the entry

[00:04:47] Bryan Fields: from the endocannabinoid system. The majority of people understand those areas. Is this like, can you kind of shed some light on that? Because I feel like we have conversations with some people in the space, and they’re surprised to hear some of this

[00:04:58] Kellan Finney: information [00:05:00] and more people are becoming aware of the endocannabinoid system.

[00:05:03] Kellan Finney: The entourage effect is really prevalent now within kind of the. Popular culture of cannabis, right? People are realizing that if they ingest just the THC molecule, they have a different experience than if they ingest the THC molecule with some of the other phytocannabinoids like turpines and, and other ubiquitous molecules within the cannabis plant.

[00:05:27] Kellan Finney: I would say probably the most well-known aspect of the endocannabinoid system comes in terms of how CBD and THC differ in how they interact with the human body. There’s this CB one receptor and CB two receptor that kind of the general public has grouped into two categories that the CBD molecule interacts with.

[00:05:47] Kellan Finney: Your CB two receptors. And the THC molecule interacts with your CB one receptor and one’s in your brain and one’s not, that’s why one gets you high. And the other doesn’t, I think that’s kind of like the general understanding right now, [00:06:00] which is there is so many more receptors and variables to consider when truly trying to understand how those molecules are interacting with your endocannabinoid system as well.

[00:06:12] Dr. Abrams: And so one of the issues is that perhaps some of the popular knowledge that’s out there. Is maybe not. Absolutely correct. And so I’m not sure I’m comfortable with a dichotomy the way you just described with THC affecting CB one and say CBD affecting CD two, if you will. I think that’s probably not born out by the gamut or scientific literature that’s being created in this.

[00:06:45] Dr. Abrams: It’s probably better to understand that there are multiple different classes of receptors a lot on, in, beyond CB one and CB two. And these important entities are affecting other [00:07:00] classes of receptors. And my own view is that one of the principal roles that CB two is triggering on a, another class of receptors.

[00:07:10] Dr. Abrams: Called the trip channels, TRP channels transient receptor protein channels. And this then fits in with many of the defined effects that these lie Gans that these phytocannabinoids are creating. But I think it’s overly simplistic to simply divide it as well. One hits one kind of receptors. the other login hit CB two.

[00:07:36] Dr. Abrams: I would encourage us not to be going down that pathway. However, it is useful if we looked at how the endocannabinoid system interacts. Other systems in the body. And you mentioned that CB one, the receptor may be predominantly brain or nervous system oriented or localized CB two, [00:08:00] probably a little more general, but it has a much more prevalent localization in cells of the immune system.

[00:08:06] Dr. Abrams: And it makes sense rather to look at the result in biology as effective. Are you turn hearing through CB one or are you triggering through but of course, CAC triggers both CB one and CB two. So it reacts, it works in both. The system is nuanced and then it goes on, there are other receptors in the class that.

[00:08:31] Dr. Abrams: And CB two are in, they all have complicated names and complicated biochemistry associated with it, but the devil’s in the details. And our mission is to deconvolute and explain this as clearly as possible to both the scientific and the light community. So let’s go

[00:08:52] Bryan Fields: back to one of the first things you were saying about different with the way Ellen approach that right.

[00:08:57] Bryan Fields: It seems like we’ve got to understand and laid the groundwork for [00:09:00] understanding exactly how it works. We

[00:09:02] Dr. Abrams: even began well, again, the biochemistry and physiology of this is not novel. Many of the other systems that we study or understand in biochemistry utilize similar mechanisms or similar pathways.

[00:09:20] Dr. Abrams: It’s just an essence, expanding the vocabulary list of what is in the human or what, what is in the organism. To understand how this works. It’s not reinventing, it’s just reapplying or fine tuning or expanding the vocabulary. We add new receptor classes. We have new. Well, again, new keys that interact with that.

[00:09:48] Dr. Abrams: I hope that that’s kind of clear. It’s not, we have to do a lot of heavy lifting for novelty. It’s more, how do you, what we learned in pursuing studies [00:10:00] in the end of cannabinoid system fit into our existing. Understanding of how it works in the first

[00:10:06] Bryan Fields: place is the endocannabinoid system commonly taught in school.

[00:10:11] Dr. Abrams: I think, you know, the answer to that, but unfortunately not. And it has been said that many med students are not even reached in that yet. You know, it’s only a couple of decades old and med school curriculum can often. B you know, going back centuries or so, you know, there’s a large historical record here.

[00:10:31] Dr. Abrams: So a little bit, we’re the victim of novelty in trying to place this into our overarching hierarchy. Like I was just saying. And so part of our mission, I think, is to explain and understand. In the context of what we already know about existing system, but at the end of the day, we do our programs, right.

[00:10:53] Dr. Abrams: And we need our goals. Then the endocannabinoid system will be core curricula in med schools [00:11:00] going forward. What are those goals? Well, there’s trying to develop programs. That can allow us to understand the deconvolute some of the problems or, or puzzles that we’re seeing in this. I mean, and this sounds a little kind of, not so clear, but one of the main issues that we’ve been facing in this is what we call a many to many problems.

[00:11:28] Dr. Abrams: That is the plant. The botanical source, the plant has a lot of different components. That interact is Kellen was referring to entourage effect or synergy or whatever. And we have many different receptors, many different locks that these fit into. And there are many different situations or doses or times of day or whatever.

[00:11:53] Dr. Abrams: So it’s this huge many to many problems. And our job is to try to deconvolute [00:12:00] this and find system systems or systematic taxonomy descriptors that will help us understand and simplify this. So we can clearly understand this has this effect in this context. Another agent or another phytocannabinoid has a second effect in this system together.

[00:12:21] Dr. Abrams: They synergize that is they add the effects together or they compete. They block each other’s effect. All this has to be worked out so that we can understand how optimally to use this product and enjoy it. Whether it’s for lifestyle or for medicinal purposes,

[00:12:41] Bryan Fields: they will sit. And I want to tell them to kind of dive in here from undertaking of what John described.

[00:12:46] Bryan Fields: I mean, the complexity of that challenge is, is, sounds like an uphill battle. Is that the way you hear it? Yeah, I

[00:12:51] Kellan Finney: mean, but anything in the scientific world is an uphill battle and I think that. The CSC, how John described it is the only [00:13:00] way that the human race really tackles these kinds of daunting obstacles, if you will.

[00:13:04] Kellan Finney: Right? These kinds of projects of understanding the physical world around us. Right. It’s not going to be one group that’s, it’s going to be collaborative effort individuals across the globe. Right. And you can even see that we’ve just, we’re on the precipice of kind of a logarithmic curve, in my opinion, associated with scientific research, directed at understanding how this cannabis plant and the chemicals, it produces changes.

[00:13:31] Kellan Finney: Human’s perception on the world, around them, right. In terms of the psychological and the psychedelic experience that people have when they consume the plant. And I mean, the amount of literature that’s published daily now is, is pretty phenomenal, right? If you look at it from even 10, 20 years ago, and it’s only increasing every day, and I think that that’s really what it boils down to.

[00:13:53] Kellan Finney: Is it haunting task to try to understand all how five or 600 different chemicals in one plant. [00:14:00] Affect the human mind. Right. And it’s not going to be accomplished by 5, 6, 10 scientists with some pipe hats and some Erlenmeyer flasks. Right. And the, in a lab, like it’s definitely going to take a collaborative effort and a consortium to be able to push the scientific knowledge associated with this forward.

[00:14:21] Kellan Finney: And the other thing is it’s, you could throw a giant army of people at it, but it’s going to take time. These things aren’t just. Checking the box, achieving the goal. Like it’s, you’re working with the real world it’s messy and you never really know what what’s going to come out of. A lot of the experiments you do.

[00:14:35] Kellan Finney: It’s, it’s going to be guessing and going out into the real world and seeing what happens and then reporting on it. And then a lot of other really, really smart individuals look at what you did, kind of provide them your critiques. And then they’re going to go out and try to build on what you do. You did and that’s science, right?

[00:14:51] Kellan Finney: It’s it’s the only way to kind of move these kinds of projects forward is. Taking that scientific approach, if you will.

[00:14:58] Dr. Abrams: And if I could just follow up [00:15:00] on that, because that’s an excellent narrative there. I think fundamentally our approach in this is to provide some kind of overarching systematics or systematic approach.

[00:15:14] Dr. Abrams: And I would outline that is understanding on the one hand. The chemo type thing, the understanding as well as we can, the list of products that are in this complex, mechanical and making that list understanding what is there that we’re talking about. And then on the other side, being able to quantify effect that we’re studying in a reputable manner, whether it’s physiological effects, mental effects biomarkers, we use that term.

[00:15:48] Dr. Abrams: That’s where a biomarker is a key indicator of a state change. In a biology or in a physiological response. But you have to [00:16:00] approach this systematically. So if you can get your content lexicon established and you can get a series of reputable affects or outcomes on to fight or measure. You just start putting it together and become ballooning as you go and drawing your conclusions.

[00:16:19] Dr. Abrams: And I think fundamentally this is the basis of the CSC approach. We’re trying to develop and bring. That kind of systematic into this

[00:16:31] Kellan Finney: field circle back on one thing you did say and tracking. So you mentioned tracking the effects that individuals have from different chemovars and this is something that the CSC has already embarked upon in terms of the ghosting project.

[00:16:46] Kellan Finney: You want to kind of elaborate a little more about the dosing project and how that has been pivotal in humanity’s effort to try to understand how these different chemovars.

[00:16:58] Dr. Abrams: No, certainly thank you for that [00:17:00] prompt show. The flagship program of the CFC is in fact, the dosing product that Kellen was just alluding to.

[00:17:08] Dr. Abrams: This was a program that grew out of a challenge that my colleague Joel tolerant. Back in 2016, when as a cannabis clinician, he was being challenged by his patients, recommend to them, what should I use? How much should I use? What is best for this indication? And sadly, there was no basis of this. And we came up with the idea that folks that are using these products, this medication.

[00:17:43] Dr. Abrams: Preparations might actually be able to report on their responses and guide these kinds of ads or provide answers and help guide our knowledge in the space. John tolerant is a bit of a rebel, and I really salute [00:18:00] him for his view that rather than clinicians necessarily dictating patients, his approach is let the patient explain to you what is working for them.

[00:18:11] Dr. Abrams: And you keep track and correlate that. So in essence, that was the heart of what we were putting together here. And we decided we, we would likely be able to do this where they crowdsource web based query platforms. And so back in 2016, we put together a proof of concept version of this, where we would be asking folks.

[00:18:34] Dr. Abrams: How much flour. And this was initially limited in scope because we knew this program, this project, or this problem is broad again in systematics. If you need to get started, define your scope, narrow it to the point where you could draw some conclusions. So we concentrated on asking folks about flour, not other processed cannabis products.[00:19:00]

[00:19:00] Dr. Abrams: Because they’re just so complex and asking them simply how much they were using by route of administration of inhalation, thereby smoking combusting, blazing cannabis or vaping it, but it was restricted to that mode. It was restricted to flower and it was restricted to the two top indications. That was tolerant.

[00:19:24] Dr. Abrams: We’re seeing in his clinical practice, namely pain and disordered sleep. And so we put out a web-based platform for this, and we were trying to ascertain, could we, based on this kind of crowdsourced. Come up with dosing guidelines for pain and disordered sleep for what people were using. And the answer was a resounding yes, and proof of concept.

[00:19:52] Dr. Abrams: And we’ve presented on this at Amarillo conference in 2018. We’ve written up reports, some of that can be seen [00:20:00] on our website. So it is a very useful and fruitful approach. And now our goals. Is to produce version 2.0, which will be much more, which will be expanded beyond that. It will now include multiple modes of administration.

[00:20:17] Dr. Abrams: It will be expanded to not just flour, but various process forms of cannabis. Well useful for oral and ingested motive administration or topical, the indications will be expanded out and the clinical survey platforms are expanding as well. And the proof of concept phase we simply ask what kind of response on a four category scale, no response, partial response, almost complete or complete response.

[00:20:50] Dr. Abrams: And we coded and analyzed the data that way. Now we’re inserting other survey modules into that, including [00:21:00] mood assessment, psychedelic altered state assessments. These are all standard surveys that are being used in the medical fields or psychology fields. We’ve asked about adverse events, side effects in proof of concept dosing products.

[00:21:18] Dr. Abrams: That will be slightly expanded and modified so that we can come up with what. Negative effects or what bad events may be occurring, but basically this work in proof of concept. And so we’re very excited to be able to expand this. And it is one of our key flagship initiatives under the clinical correlates program with the CSC that we plan to pursue in the near term

[00:21:46] Bryan Fields: for individuals.

[00:21:47] Bryan Fields: Did you need to feel comfortable with that study? And then I have a

[00:21:50] Dr. Abrams: follow-up question. So it’s a great question, Brian. And let me just say that what we’re basically doing is what’s called a [00:22:00] phase. Clinical study, if you will. Clinical drug development typically follows a three phase development program phase one where you’re looking for toxicity in the preparations that you’re administering to people.

[00:22:18] Dr. Abrams: Phase two is looking to try and ascertain what that dose should be. And phase three is looking for efficacy. Am I getting the desired effect? This is a classical paradigm that EU FDA, China, PRC, China, FDA uses. This is very useful drug develop. Once your drug is approved. You do post-marketing surveys and these are typically referred to as phase or where you’re actually looking for what kind of responses beyond what the drug may have been identified for?

[00:22:58] Dr. Abrams: What about [00:23:00] side effects that were not part of the initial studies? So they tend to be broader in our case because of the way. Our models work. We were looking for statistical significance in our models and we could just keep going. Accruing respondents until we hit significance. So it’s not like we had to go in and negotiate with any agency up front that we will put 50 or 60 or a hundred to get those kind of answers.

[00:23:33] Dr. Abrams: But it’s fair to say that for the THC responses that we were trying to measure in smoke flower, as we hit about a hundred respondents, it became real. And so that answers your question it’s at that level. But of course, if you’re trying to find nuances, you’re trying to find what interacts with that. THC, what turkeys or other components [00:24:00] that are present.

[00:24:01] Dr. Abrams: You need more respondents in order to tease out that complexity in order to deconvolute that many to many problems. So I think, I mean, I’m answering your question simply it’s on the order of a hundred or so to get started, but of course our goal is to do much larger data. So that we can begin to deconvolute and understand what either minor cannabinoids or terpenoids or other components, files, esters that are present in.

[00:24:32] Dr. Abrams: In this botanical, how they affect the response,

[00:24:36] Bryan Fields: the reason how many is because obviously everyone handles flour differently may on women, time of day. Wait. And for me personally, every time I consume flower, I’m hungry. And then Sleepy’s. I might not be the best for that, but others might have a different experience.

[00:24:51] Bryan Fields: So I was wondering how you could feel comfortable in, in kind of segmenting all of those data variables and then feeling comfortable with the output you have and understanding that. Okay. Because [00:25:00] we’ve seen enough significant enough difference to go forward with the next

[00:25:03] Dr. Abrams: one. I mean, that’s a great question, Brian, but if your survey methodology specifically is asking about fast and in essence, we are, we’re talking about mood survey.

[00:25:17] Dr. Abrams: And mood surveys specifically can address or do address questions of fatigue, calmness, tension, et cetera, that comes out of the analysis. Doesn’t it? Because you can tell if the bulk of your respondents are reporting that way, then you know, that’s what the response is. If it’s. And I believe it will, or it does.

[00:25:39] Dr. Abrams: You begin to understand how that subsetting occurs and you begin to look at well, what is behind that sub setting? Is it gender? Maybe, maybe, probably not. Is it genotype you might be able to you know, you’re marrying these kind of work with genetic screening that is [00:26:00] increasingly popular. And so you’ve got that parameter.

[00:26:03] Dr. Abrams: You can ask questions or we know about when did you dose How much did you smoke? And most importantly, what did you take it with? And that is another aspect of this that we’re seriously thinking about how to incorporate into this next version or the one after the interaction term with other agents. We know we don’t live in a world where all we’re doing is consuming cannabis in isolation.

[00:26:31] Dr. Abrams: What about with that beer you had? What about those with tobacco? What about other dietary supplements or sleep aids or something like that? And we think that this crowdsourcing approach can help be convolute or understand that, but we just have to ask the questions right. And have it in a form where the data will speak for itself.

[00:26:54] Dr. Abrams: When

[00:26:55] Bryan Fields: you said that I had so many friends that came to mind of just wanting to just sit there and consume [00:27:00] canvas all day for a research study. So that’s what you’re looking for. I’m sure we can put up an announcement. I’m sure we can love the number of applicants for you

[00:27:07] Kellan Finney: do count, huh? No, I’m too. I get bored.

[00:27:11] Kellan Finney: You know what I mean? I’m not a big fan of video games. Like I don’t need to need to find something to keep myself busy while I consumed that kind of cannabis. You know, you started from

[00:27:19] Bryan Fields: a popularity standpoint, I’m sure you can find a couple of people that come to mind that would be interested in participating in such a study.

[00:27:25] Kellan Finney: Oh, we could totally make brochures. It would be sold out. I mean, we could really get a big bonus.

[00:27:31] Dr. Abrams: Well, interestingly for proof of concept phase, we were recruiting through Google ad words because as a nonprofit. We got access to free Google ads or Google supported onwards capability. And so we were experimenting with, can we change the recruitment profiles who are our Google searches or directed Google searches?

[00:27:57] Dr. Abrams: And there’s a whole story [00:28:00] about that concept, how we were able to, for example, channel more respondents into our system. Indication arm when we saw that most respondents. Checking the pain box, but not checking the sleep box. And we wanted to boost that number. And in fact, that’s how you go. If you get significance in your model for pain, because you have enough respondents and you go, oh, well, I don’t have quite enough for sleep.

[00:28:27] Dr. Abrams: I can’t draw any conclusions yet. You try to recruit in sleep and then you start to see, oh, I’m at the same number that we’re responding in pain. And I. Significance in my, my models and I don’t have it and sleep, therefore, either something is not working right. Or it is not so efficacious for sleep, which of course we know is not necessarily the case.

[00:28:52] Dr. Abrams: I’m just kind of quoting an example here. But the point is this approach is dynamic. It’s ongoing. [00:29:00] You don’t have to upfront postulate what your study size is going to be. And then open it and close it. I can keep going. I think that’s one of the advantages of this crowd source web-based phase four approach.

[00:29:14] Dr. Abrams: I hope that’s

[00:29:15] Bryan Fields: clear. Yeah. Yeah, it definitely is. And I can only wonder if you use Google ad words to try and attract people to your study. If I would’ve seen a Google ad that said consumed cannabis for sleep study, I would have assumed immediately it was a lie or a trick or some ception technique, because that seems way too good to be true.

[00:29:31] Bryan Fields: And I’m curious in order for them click that. Good for those guys. It was

[00:29:34] Dr. Abrams: more nuanced than that because in those days, Google had inhibitions on what you could use and we were not able to. Those kinds of terms in, so we had the slalom around the Google restrictions, which we did successfully, but there are, you know, of course there’s always ways, I guess, of getting these announcements out, but it worked, it worked, you know, we could, [00:30:00] we could show.

[00:30:00] Dr. Abrams: Increases in responding cohorts, just based on the terminology that we’re using. But now, Brian, it was not quite as blatant as yet smoked cannabis and respond to this study. I don’t think it would have cleared Google back in 26 and 2017.

[00:30:16] Bryan Fields: That would’ve shut down your site because Google would have been like, there’s a lot of clicking going on here.

[00:30:21] Kellan Finney: I want to just elaborate a little bit or they’re on the dosing study. So the survey is one portion of it. Is there any scientific techniques or technology that’s currently utilized to kind of understand what’s going on in the brain? And is that something that the CSC is looking to. To embark on or already has, is you want to kind of elaborate on, on some of the techniques that are used to look inside the skull to see how this is really interacting with you from a biochemical perspective.

[00:30:51] Kellan Finney: No,

[00:30:51] Dr. Abrams: that’s a great, great question. And we are extremely active in this space through a very fruitful collaboration [00:31:00] that started a number of years ago when I was director of Emerald science the Emerald county. And received across the desk. A very interesting abstract from Dr. Jeff Karen clinical psychologist, out of Eugene, Oregon who had proposed and executed a study of smoked cannabis, runnings, and Q E G quantitative EEG measurements.

[00:31:26] Dr. Abrams: So what that is in essence is putting electrodes on the surface of the brain of the surface of the, of the sky. It’s done very routinely. Medical sleep assessments. Cetera. It’s been a part of neurology for many, many years. That’s not invasive, it’s not a problem. And so he approached us at Emerald at the Emerald conference with this great abstract that really piqued my interest, but he had chosen a couple of strains.

[00:31:56] Dr. Abrams: For the study. And my sense was that was [00:32:00] fine, but he was not really surveying the whole kind of versus it will, as it were. And I was interested in seeing if he would be receptive to expanding that initial study, to include strains on the other side. And for those of you who are listeners who understand sprain, he had not included initially was the sour diesel, or what we call the fuel aroma.

[00:32:26] Dr. Abrams: Chemo type side. And so even as receptive, we added that in and produced the study with these three strains reported on it at Emerald 2019. And that presentation is available on Emerald website. It’s also available through CSC website, but the results have been very interesting to deconvolute and study.

[00:32:49] Dr. Abrams: And out of that, we do see a pattern. Of response in cannabis users with these different strains that we can begin to [00:33:00] understand maybe what some of the underlying fundamentals are. So this gives you. A bone, a feed, a biomarker, if you will, on beyond simple survey responses, it’s almost akin to being able to do blood work or something like that.

[00:33:17] Dr. Abrams: It’s a bone of feed, a bio marker. In addition, in this study, he included surveys, which I referred to earlier regarding mood, the standard Bruno mood assessment, and an altered state, such a delicate questionnaire, which is also part of. That field and we’ve been calling correlating and co-leading the responses.

[00:33:39] Dr. Abrams: And trying to map them to brainwave patterns and we are making good progress. So going into the future, one of the clinical correlates initiatives of CSC is to expand that clinical, the clinical trial work, if you will, based on quantitative EEG. [00:34:00] Ingested smoked or ingested cannabinoids or cannabis product.

[00:34:06] Dr. Abrams: We’re going

[00:34:06] Bryan Fields: to dive into prediction students. Before we do that, we ask all of our guests a few final questions. John, if you could sum up your experience into a main takeaway or lesson learned to pass onto the next generation. Oh, would that be?

[00:34:20] Dr. Abrams: Wow. Follow your heart and your interests. It took me many, many decades to get to the point where I could say I am completely involved in kind of the science and understand standing the cannabinoid industry and the underpinnings of the cannabis.

[00:34:40] Dr. Abrams: Mine. It was a process to get there, to throw in. Wholeheartedly in this space I am exceedingly happy and content at the progress we’re making. And so my advice, I guess, to those that come now or afterwards is try to recognize as early as possible what your goals and dreams are [00:35:00] and go do it. I think that’s

[00:35:01] Bryan Fields: perfectly said your personal experience with cannabinoids.

[00:35:05] Dr. Abrams: Well, I don’t think it’s a, you know, it’s a secret that Been a fan of, of the plant, particularly smoked cannabis for over 50 years. I find it very beneficial for numerous reasons. Certainly the calm, calming, and relaxation component, but for me, I find it at least what I hang on the THC component, age, strong associative ability and ability to kind of lay.

[00:35:35] Dr. Abrams: Concepts and disparate ideas to come up with valid hypotheses that can be tested. It’s almost for me like a brain booster. And I guess I might put myself in the realm of what you might and I mean, this is. Not self-aggrandizing but successful stoner. And I think I probably have been, in addition, [00:36:00] I’ve been trying to understand the best way to consume and use CBD or CBDA because of course there’s so much interest in that.

[00:36:08] Dr. Abrams: And one of the approaches that. Pioneer, not pioneer. That’s an old approach. It’s decoction that is boiling botanicals and creating a tea out of it. But in contradistinction to a tea, which is perfusion or infusion here, you’re actively boiling it. And so not only are you extracting components, but you may be changing them advantageous.

[00:36:34] Dr. Abrams: In the case of cannabis, we know that there’s a decarboxylation chemistry. That’s important. That is you have to take off one of me, functional groups, part of the molecule in order to have a certain range of activities. And I’m being a bleak here because we’re a big proponent of non decarboxylated cannabinoids for biological effects.

[00:36:57] Dr. Abrams: But the point is, is that kids a. [00:37:00] Approachable way to get CBD and or CBDA medication in a cheap. And what I believe is an effective way, simply boil hemp or CBD bud and drink it. And I find that that works. Quite well. So we’ve presented on the approach and the content that comes from this at the 2019 ACS American chemical society, Canada subgroup.

[00:37:31] Dr. Abrams: Meeting here that was in San Diego then. And again, details can be seen on presentations that are on our website. Interesting approach on how to acquire CBD or ingest CBD meditation. So I guess I would say between THC cannabis inhalation, and I’m a big vape user at this point and CBD decoction that’s all I get through my day.

[00:37:57] Dr. Abrams: I love the

[00:37:58] Bryan Fields: brain booster technique. That was, [00:38:00] oh, that was one of my favorite ones are likely going to steal that. So let’s go onto prediction time. 10 years from now 2031, John, will we have enough data and research to have personalized cannabis menu?

[00:38:14] Dr. Abrams: Well, I’m going to just answer that by saying, I’m going to drop off the word cannabis medicine and say 10 years from now, what will the stage of personalized medicine be?

[00:38:26] Dr. Abrams: Because we have to move that forward as well, right? I mean, we’re not going to have personalized cannabis medicine without personalized medicine. I’m an optimist. I think we will get there. And I think it is the key. There’s some paradigm changes. Of course. First of all, we have to be able to generate what is the person or generate information on who or what is that person?

[00:38:55] Dr. Abrams: And that’s a heavy lift because it’s expensive to get that. I mean 10 years from [00:39:00] now. I hope we have the resources that more people, not just wealthy elite have access to that kind of personalized diagnostics along side or on the second truck, you have the evolution in cannabis or cannabis science can adenoid industry and cannabinoid medicine.

[00:39:20] Dr. Abrams: And so yeah, there probably will be a marriage sometime in the future for this to be the best. But it’s, it’s still a heavy lift. Brian, I mean, 10 years is that it’s coming fast. I’d like to

[00:39:35] Kellan Finney: believe that it’s there. You know, I mean, 20 years ago we were still in the middle of the human genome project, right.

[00:39:43] Kellan Finney: In 2001. I could be mistaken on my dates, but it costs SWAT $13 billion to analyze the first full human genome. And now. I can go to 21 and me right as a 21 of me and they 50 bucks, they [00:40:00] send me a, a Q-tip. I swab my mouth, put it in there, send it back. And they’re going to give me a pretty decent understanding of my genetics from, for a significantly lower costs.

[00:40:12] Kellan Finney: So I think that. As we continue to improve the techniques associated with understanding biomarkers inside the human body, as well as genetics, that that cost will continue to fall. And as that costs continues to fall more and more of the population will be able to afford that kind of testing. And as more of the population.

[00:40:39] Kellan Finney: Gets tested for their genetics. You created larger data sets and efforts. Like what the CSC is embarking on with the dosing project. It’ll be easy to kind of look at interdisciplinary data to be able to pull these correlations. Right. And so I think in 10 years it may not be like, What you would see in Hollywood as far [00:41:00] as like personalized medicine.

[00:41:01] Kellan Finney: But I think that someone with enough motivation will be able to pull their 21 and me genetics data and put it into probably some sort of free software too. Pull correlations between say the cannabis, they consume their genetics and how they feel about it. And I think that that would be a form of personalized medicine associated with cannabis.

[00:41:23] Kellan Finney: So I know that’s a long-winded answer, but that is my thoughts on it. I mean, Brian coming from a less traditional scientific background. What are your thoughts on cannabis being a personalized medicine in the future? I mean, kind of walk us through that optimistic.

[00:41:40] Bryan Fields: Brian wants to say yes and wants to agree with you guys.

[00:41:43] Bryan Fields: But the other side, Brian, here’s our friend, Dr. Matt Morton says groundbreaking science is expensive and takes time. And I think 10 years is just not going to be enough time to learn everything. We need to learn, to understand all the datasets. There’s a ton of variables and [00:42:00] teams like the CSE. They’re doing incredible, incredible efforts, right?

[00:42:03] Bryan Fields: They need help from outside parties. Like you were saying, John, like your team can do as much as they can, but need participants from outside studies. And I think that involves more people getting involved in contributing to the cause. So while I’d love for that to happen, I think the only way that happens is if more organizations kind of align with the CSC and people like you, and I tell him, continue to contribute toward the car to help raise awareness and to get people out there to contribute whether it’s information or that donate their funds.

[00:42:33] Bryan Fields: I don’t know, I’m going to have to say no, but I think that’s the next line where Don, if people want to get involved with the CSC, Where can they do that?

[00:42:42] Dr. Abrams: Well, I would start by looking at the website and then thinking about what your level of interest in participation might be. We have donation programs, we have sponsorship programs and we have partnership programs depending on.

[00:42:58] Dr. Abrams: What your level [00:43:00] of interest in this is. And I think that’s where, where I would start. We are interested in collaboration. We are interested in consortium building. We are interested in working with top tier folks who really do want to move this forward. This is a huge effort and, you know it takes a lot more than a village.

[00:43:20] Dr. Abrams: And so we have to be open to that. We have to kind of make sure our egos don’t get in the way we have to make sure. While intellectual property protections are very important and that we’re aware of them that they too don’t get in the way to inhibit this. It has to all be pulling in the same direction, nuanced as it is.

[00:43:43] Dr. Abrams: I’m optimistic that we can move this forward 10 years and it’ll be, it’ll be a challenge, but if you don’t start, you don’t get it.

[00:43:53] Bryan Fields: Perfect. Well, I appreciate your time, John. We’ll link everything up in the show notes so that people want to get involved in and find the link and [00:44:00] look forward to kind of keeping up to date on what’s going on with CSC and having you back soon.

[00:44:04] Dr. Abrams: But thank you so much for the opportunity. It was a very enjoyable discussion.


Thanks so much for listening to The Dime . Subscribe or follow us on Seeking Alpha, Libsyn, Apple Podcast, Spotify, Google Play or Stitcher. And we’d really appreciate it if you could leave us a review on Apple Podcasts. It helps others find our show.

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In March of 2021, the United States Department of Agriculture (USDA) granted Oregon State University ~$300,000 to fund studies focusing on hemp byproducts as a source of cattle feed.4 There are several driving forces behind this connection, including allowing hemp to be grown on cattle farms, maximizing the nutritional value of livestock feed, and providing a use for the extracted hemp biomass that is currently going to waste. At present, the cattle feed market is valued at $76.9 billion with a compound annual growth rate of 3.2%.

Cattle Feed Market Size

Cattle Feed Market Size

One percent of the total global cattle feed market equates to ~$769 million, and if hemp captured that market share, it would boost the CBD hemp industry’s annual revenue by more than a 29%. Approximately 130,000 acres were planted last year, and assuming that there are 165 pounds of hemp per acre, that represents ~21,450,000 lbs. or 10,725 tons of CBD hemp..6 The North American region alone consumed 27.7 million tons of beef cattle feed.7 Turn a waste product into an opportunity.

By adding revenue through a waste stream, you’re creating a sustainable, mutually beneficial relationship.

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RETAIL

The ship that blocked the Suez Canal, the Ever Given, is being held by Egypt until a fine of nearly $1 billion is paid, and this spells trouble for the retail sector of the cannabinoid supply chain.

The cannabis industry is arguably the least environmentally-friendly industry, particularly when it comes to consumables. Everything purchased at a licensed dispensary, including vape pens and CCELL cartridges must come in plastic, child-proof containers. All of these packaging materials are sourced from China, and limited access to these supplies could springboard into a price jump for consumables. This is particularly true for cannabis companies that have already been struggling to make ends meet, as they’re now faced with an increase in their cost of production with no way to make up for their losses. Losing access to the exact SKU of containers previously ordered is also a potential roadblock cannabis companies may encounter.

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Analysis of the Cannabis Pre-Roll Market

Pre-Roll Market Size

PRE-ROLL MARKET SIZE

Additional data from Headset* provides more insight into the current state of the industry. It’s clear that certain factors associated with differences in sales volume between states can and should be examined.

The above chart outlines the correlation between average price per unit and overall market sales data. Based on this chart, there does not seem to be a correlation between annual pre-roll sales and unit price. When viewing the results of the correlation, there does not seem to be a direct relation between annual pre-roll sales and unit price. California and Massachusetts, where the unit price is the highest out of any states, also boast the first and third largest markets by sales, respectively. Washington on the other hand has the second largest pre-roll market and has the lowest average price per pre-roll unit.

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