Mar 23, 2021
Cannabis is Legal in AZ thanks to Prop. 207, & Harvest Health weighs in
- BRT S02 EP12 (59) 03-21-2021
Things We Learned This Week
- Harvest Health is a public co. (since 2018) traded Cannabis company (in Canada) that operates in 5 states with 15+ locations in AZ alone
- Legalization led to Tax Revenue off Cannabis business that was happening already and cleans up crime, business was illegal in past and unregulated
- Regulations will relax over time, and probably all 50 states will legalize Cannabis use
- Prop 207 passed, Cannabis fully legal in AZ in 2021 - Dedicated line for medical, huge demand 3-6x increase in revenue
- No More licenses, high barriers to entry in AZ as it is a limited licensure state
Guests: Steve White, Founder / CEO of Harvest Health
https://www.linkedin.com/in/steve-white-40bb098
Steve co-founded Harvest in 2011. After opening Harvest’s first dispensary in 2013, Steve worked there for several months fulfilling orders, performing reception duties, and consulting with patients. He quickly learned that he had the ability to help shape a company that gave people control over an aspect of their life where they previously had very little – their health and wellness. This led Steve to instill a culture of education and empowerment at Harvest to provide patients much needed products, resources, and support. For example, Harvest facilities host a new patient orientation and monthly support group meetings for epilepsy, chronic pain, cancer, and PTSD.
Under Steve’s direction, Harvest
has also engaged in many community activities and events, including
donating more than $500,000 to local charitable organizations,
veterans, seniors, and patients in need. Steve founded and now
serves on the board of directors for Harvesting Hope, a non-profit
organization that supports young children suffering from seizure
disorders. To date, Harvesting Hope has provided a wide range of
services for over 100 families.
As Harvest’s CEO, Steve is
responsible for license acquisition, start-up, operations, and
organizational direction and strategy. He has also been
instrumental in navigating state- and county-level regulatory
audits, including, to date, hundreds of state inspections across
multiple states, four Americans for Safe Access Patient Focused
Certifications, and more than fifty certified financial audits. He
is also a board member and President of the Arizona Dispensary
Association. In addition, he has done hundreds of interviews,
speaking engagements, and has been qualified to provide expert
testimony on a multitude of marijuana-related topics.
Harvest Health is a public co. (since 2018) traded Cannabis company (in Canada) that operates in 5 states with 15+ locations in AZ alone (18 in the future by 2022). Steve talks about the history of Harvest from 2012 to present, and how the industry has changed in the last 5 years, ad what he expects in the next 5. Also how Steve sees the Cannabis industry – is it mature? – or - Issues with the image of industry. Steve believes it has moved into the mainstream.
The insider knowledge in this episode is vast from regulations with the dispensary business, to the effect legalization has on the business, going public, relationship with investors, and distribution of the product (from farms for growing or facilities to the dispensaries). We talk of the influx of corporate money and companies, and if the competition from alcohol and cigarette companies will hurt.
Harvest is also the biggest player in the Arizona market with 16 dispensary licenses here, supplied mostly by a farm in Camp Verde, according to the company. Harvest has lucrative retail locations in big markets like California and Florida. And that's just the beginning.
Notes:
Building new installation near Cape Verde & Highway 260, off I-17
OTC listing in USA, w/ symbol – HRVSF
Canada - CA stock symbol – HARV (Public IPO in Canada in 2018)
States - CA decrease low cost for license vs FLA increase $100 million / license
License value of $15 million per in AZ, mass scarcity.
AZ better regulated state with same AZ Staff since 2010 and is a model program
4 cultivation (one has production facility) and 1 production facility
Zoning issues w/ Cannabis, where you can set up the business
Farming - outdoor and 4 indoor, greenhouse and indoor vertical
Other Cannabis States Harvest operates in - 9 PN, 6 FLA, 3 MD
Legalization led to Tax Revenue off Cannabis business that was happening already and cleans up crime, business was illegal in past and unregulated
Work with other distributers wholesale / niche
Harvest Goal – was to raise $200 million in funding, instead raised $800 million – had to turn down money.
Harvest was a startup in 2018 with huge potential, AZ is a mature market
California Pot Co’s make money $ going public (IPO)
U.S. industry looks great
Store 2011 - 2013 – license per store, full vertical
Health Q – AZ 2010 medical act
State Exceptions for Cannabis industry – since Fed illegal
Regulations will relax over time, and probably all 50 states will legalize Cannabis use
Guests: Melissa Diaz w/ Rebel Rock
- customized accounting
solutions, HR, and M&A for the Cannabis industry in
AZ.
https://rebelrock.co/melissa-diaz/
https://www.linkedin.com/in/melissa-k-diaz-cpa-10215623
Melissa’s accounting experience as a CPA spans numerous industries, both domestically & internationally, including healthcare, hospitality and, of course, Cannabis. In addition to co-founding and serving as CFO to Rebel Rock, Melissa is CFO and Shareholder for High Rock Accounting, which places an emphasis on utilizing technology to strategically make day-to-day and long-term financial decisions, while pursuing company goals and compliancy.
At High Rock and Rebel Rock, Melissa helps companies remain competitive and efficient in increasingly high-pressure and high-stakes environments. Starting in 2016 she started branching out into the Cannabis industry.
Melissa discusses the passing Prop 207 in AZ, and legalization. What are the laws and regulations now in AZ, and federally. What is the expected future for the industry and will legalization go nationwide. She covers the bigger picture of new investing in the Cannabis business. What requirements investors look for in the Cannabis industry, and how the whole industry is maturing.
Cannabis (Marijuana) License in the state of AZ go for $10’s of millions of dollars, and are difficult to come by now. The industry will grow 30 – 50% in 2021, after 30% growth in 2020 to be over a $1 billion annually in AZ with a 16% tax statewide.
Notes:
Testing requirement for dispensary
Prop 207 passed, Cannabis fully legal in AZ April 2021, started Feb 2021 - Dedicated line for medical, huge demand 3-6x increase in revenue.
April 2021, started Feb 2021 - Dedicated line for medical, huge demand 3-6x increase in revenue.
No interstate commerce, not fed legal and if you cross state lines, still a drug offense & crime - 280 E – tax code, Cannabis illegal federally
Shortage of supply vs. large demand
Canadian stock market – Cannabis is federally legal in Canada
Private investment or SPACs – Cresco created REIT 11PR fund
No banking, no merchant or credit card accounts – all cash business
Security in locations, as potential theft real issue, plus need cash control
Copperstate Farms – greenhouses and cultivation
Vertical farming with special lighting and timed watering and feeding
Regulation – on site security for cultivation
Rebel Rock has medical card
No more licenses, high barriers to entry in AZ as it is a limited licensure state
Safe Banking Act – need this to pass for cannabis banking at Fed level
Investors all in, at tipping point
Due diligence is sophisticated
Lease a license, avoid huge CAP x Cost of $16 million, new license may be less
$150K cost of license in 2010 or 2013
30% increase in sales revenue for Cannabis in 2019, to 2020
$700 million - $1 billion annual revenue (and beyond +) for 2021, growth of 30 - 50%
Taxes - 16% AZ tax + city tax, 10-11% medicinal & up to 27% total recreational
Cannabis Topic: https://brt-show.libsyn.com/category/Cannabis-Hemp-Marijuana
‘Best Of’ Topic: https://brt-show.libsyn.com/category/Best+of+BRT
Thanks for Listening.
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