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Editors’ Note: This is the transcript version of the podcast we posted last Wednesday. 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. Enjoy!
Graham Farrar: If anything, he was one of the architects of the drug wars, right? Like he is not a pro-cannabis guy. But when he campaigned, he said that he would do things for cannabis. And we’ve been throwing pebbles at him for a long time because of by our appearances, he hadn’t done anything. Then or whatever that was a few weeks ago he basically he did what he said he was going to do. And I think that to me, it was two years later than I wanted. And I’m sure it was political timing, with the midterms about when he announced it. I understand politics to some degree, but I do think it’s a lot more strategy than stunt.
Rena Sherbill: Hi, again, everybody. Welcome back to the show. It’s great to have you listening with us as always. Today, I’m psyched to bring back a good friend of the show, Graham Farrar, President and Co-Founder at Glass House (OTC:GLASF), a company that went public last year. We’ve been talking to Graham and Glass House for a while.
So we get to Glass House, of course with Graham and I asked a question based on the factor grades that we have surrounding our quant system on Seeking Alpha, which is what measures a stock, and how we rate it a buy or a sell or hold. So our quant rating system has a hold on Glass House. I mentioned that to Graham and we get into it. So all those factor grades you can only see with a premium subscription to Seeking Alpha, which right now is 50% off because of earnings season.
You also get a seven day trial. I really recommend even just trying it out for seven days. I use it basically all the time to prepare for my — to prepare for this podcast, especially when I’m covering a specific stock. But really, it’s how I cover the news and the cannabis stocks coming at me. And in terms of the premium features, it’s the ratings that I mentioned. It’s the factor grades and they get into that and they describe how they measure that or stock screeners. There’s price alerts that you can set up. There’s a ton of stuff. It’s 50% off. Try it. Let me know what you think. I feel like it’s really beneficial. And when we talk about doing due diligence in the industry, and what that looks like, that looks like a lot of research. That looks like a lot of talking and reading and listening to what analysts have to say.
Obviously not just listening to people that are talking from the company, but comparing that with what analysts say, and then doing your own research, looking at transcript calls from earnings, looking at filings, getting into the S-1s. All those things help us as investors. So it’s a great time to take advantage of that, especially as the market is low. And you know what I think. And honestly so many people that have been on this podcast thing, it’s now is obviously before it breaks out the time to get in. So research what companies you should be investing in, want to be investing in, would recommend somebody else to be investing in.
Hope you enjoy this conversation. I truly enjoyed having a lot of great insights here. Always great to catch up with Graham.
All right, Graham. Welcome back to The Cannabis Investing Podcast. Always happy to talk to you. Always happy to have you on the show. So thanks for coming back on.
GF: Yeah, thanks a lot for having me, Rena. It’s been too long. I’m glad to be back and have a chance to talk to you. A lot has happened.
RS: A lot has happened. Indeed, indeed. The curse of beware of living in interesting times. I believe that we have enough interesting times to last as a couple lifetimes, I would imagine. So you’ve been on the show a few times before, Co-Founder of Glass House. I’d love for you — I don’t want to give the whole background even for people that don’t know the Glass House story so well. You can check out our earlier episodes. But I’d love to catch listeners up on where you see Glass House. We’re recording this November 2, 2022. How do you see it in light of where we’re at in the industry? How are you thinking about Glass House?
GF: Yeah. So I’m glad you to say that they can put it in the documentary. I’m sure there’ll be a movie made about this, about this some of this stuff at some point. I hope we’re in it. I hope it’s in a good way. I think it will be. But we are I think certain that maybe through the you really started to see the light, I think on the end of the war on drugs, which, of course was bullshit. It was never a war on drugs. It was a war on people specific people with that. And so bringing that to an end is first and foremost should be on everybody’s mind.
It certainly is on art and cannabis in particular is such an amazing plant that has so much good for so many people and we’ve been we’ve perverted it into something negative and it’s awesome to start to see, I think what do we have for almost 40 states now that have either adult use your medical and in a week there’s five more on the ballot. So we could very quickly be in a spot where 45 or so out of 50 states have recognized that the word cannabis is not approved for on. And so it’s really exciting to see that coming down and proud and honored to be a witness to that.
So and be a part of it right, I guess Glass House too. So we’ve had a really exciting, very productive I think last year, but basically we went public about a year ago, it was right at the end of June. So just over a year now. And you know, really from a strategic initiatives point of view, and what we set out to do on our to do list, got a lot done. So we raised about $140 million, which at the time actually felt short, it was short of our goal. But the fact is, we got it done when many others weren’t.
So if we look back now almost 24 months in hindsight, I think it’s the third largest equity raise in U.S. cannabis in the last two years through Trulieve (OTCQX:TCNNF) and Curaleaf (OTCPK:CURLF) the only ones bigger. So we were talking about the Olympics earlier, it’s kind of like making it to the Olympics. And you’re on the podium, right. Of course, you won the gold medal, and standing on the podium, and the Olympics is still a pretty awesome spot to be.
And the really important part is we went public for reasons which is we have identified what we believe as a unicorn farm. I think it’s the most valuable asset in U.S. cannabis may be global cannabis. This farm that is 125 acres, 5.5 million square feet are very high tech greenhouses and the perfect climate. And it was expensive. And then we went public to buy it. And we took that $140 million. And we did we bought it. We set up $100 million credit facility. We got the farm retrofit and record time, basically on time and on budget, which you almost never hear, especially with the supply chain issues of the pandemic, we got the corn license, we got the farm planted, we have the that was ahead of schedule, we sold our first pound in Q2, which again was ahead of schedule there. And it’s amazing.
I mean, we are now on our I think our third harvest is the first million square feet that we planted. We have the first phase of that 5.5 million square feet turned on now it’s just about a 1.5 million square feet. We’ve got the largest nursery in California, cannabis nursery in California, which I think probably makes the country and maybe even the world. And it’s really amazing. It hasn’t been without its learnings. But we’re well on our way to the goal of being able to basically grow indoor quality cannabis and outdoor prices. And then when the time is right to scale that up to, as big as we as we want it to be. And it’s a really special roof washing robots and onsite cogens and ability to make electricity for persons instead of buying them for 12, like it’s a really special spot.
And then in parallel with that we started with three stores. We currently have eight, we bought a chain of stores and we’ve opened some up, we’ve got three under construction so we should be probably 10 stores open by the end of this year. We’ve got a store that’ll open this month, and hopefully one that’ll open up next month construction gods willing, we acquired plus gummies. So we now have a top five flower brand and a top five, edible brand.
I think we’re the only state in California to do that. And we’re kind of — we’re checking off the list. That was our goal, build retail big brands get this new farm set up to bring our cogs down. We had $158 a pound last quarter, we committed to $158 a pound for Q3 which we’re about to report on the 10th so in about eight days, we’ll report our Q3 we’re really excited about that. And I think,Q1 and heading into ’23 there’s a lot going on.
And that’s in California, which is probably the hardest. Cannabis is a hard market and a hard sector. California is the hardest is a home, this is training at altitude out here. And we’re still making pretty amazing progress. It’s you don’t train it out to because it’s fine. You train it out to because when you meet somebody who didn’t you win and that’s what we’ve been doing. And that’s what we’re building Glass House to be able to do. And I think that Biden and the state commerce, the progress we’re making those it feels like, it feels like the world starting to come to us a little bit right. We built ourselves to be ready for today and tomorrow with feel like a lot of others are ready for today and yesterday and I like where we sit right now.
RS: Right, luck plus preparation, right?
GF: Yeah. Or, Opportunity Knocks but you got to open the door. And sometimes it’s pretty hard to bring all the pieces together. It’s as you mentioned, cannabis is kind of like every day is Monday and every weeks a year kind of world right now. But busted down the door changing 50 years of stigma and building $100 billion market, you’re not — you don’t expect us and when that’s your goal.
RS: Yeah. And speaking of you know, high altitude training, you need a lot of stamina to make that to make to the end and even to make it to the beginning of the end. I think when we talk about Glass House, a lot of things that you mentioned just now were things that like let’s say in the past year, if we were talking about Glass House. Well, are they going to finish the Glass House Well, are they going to get operational? Well, are they going to increase the number of dispensaries are they going to branch out of kind of the cities that they’ve been in. Kind of all these things, and now, all the things that you mentioned, a lot of — the cultivation tax was another one, where they going to get rid of the cultivation tax in California? They did. That’s obviously helpful to a company like yours.
And now we’re seeing kind of — well, I want to stay on track for with Glass House for one second, before I get ahead of myself. With all of that good news, do you see yourselves being EBITDA positive by next year? Are you putting like a figure or a goal like that?
GF: Yeah. We will be free or free cash flow positive next year. I mean, that is that is absolutely our target. And we have within the ecosystem, we have the pieces that we need to make that happen. So yeah, that is that was very much the plan is to be cashflow positive next year, we think that’s the Holy Grail. We think being able to do it in California makes you a — really I mean, it is free cash flow positive California cannabis company. There’s no statement I would rather make because our belief is that like, you might– you probably don’t have a favorite non-Mexican tequila brand or just come from Florida. Philly cheese days come from Philly cannabis come from California, or at least it will out eight out of 10 times.
It’s a super competitive market. But competition breeds excellence, right? Like, and if you are in the top in California, you know, you’re really at the top right. Like, if being top five and Florida, your last. Like in California, that means you’re better than 1,600 other brands that are trying to kick you off the shelf every day. And people who’ve been doing this for 27 years that since prop 215 has been medically legal here, right. And sometimes I worry that it sounds like a California arrogance. And it’s not that or it’s just not all states are meant to grow cannabis, right.
Like when you say oranges, you think of Florida. If you say corn, you think of Iowa Right? Like those are, that’s where that crop is, it prospers, right. And we don’t see that in the way that we do. Shouldn’t cannabis because of the silos that we’ve built. And that’s a regulatory thing. And I believe those regulatory things are going to start pulled down. But if you look at places where that doesn’t happen, like strawberries, for example, 90% of the strawberries in the United States come from California, because California is a great place to grow up. And so growing cannabis, or cannabis likes to grow is one of our fundamental thesis and that’s what we’re setting up here. And I think the day is coming, where that’s going to play out.
So, I like it a lot, where we’re at. It doesn’t mean it’s easy, but I do think that if someone’s playing football for 27 years, and someone else was playing football for two years, who’s better. It’s just that Californian, Boris Jordan has said he doesn’t think there’s going to be cultivation east of the Mississippi. He also said he thinks all the innovation happens in California, right? So not just talking my own book there. He doesn’t really have assets here.
So he’s just saying what he thinks. And I think he’s right, which is a lot of in Florida, enough pick up in Florida of it. Like two months ago, they legalized BHO for the first time, right? And this is like, that was 2018 in California, I don’t even think you can get that in the door of a dispensary out here. Now they’re already on a Bubble Hash and libraries and myrosin. It’s just the place where that culture and the genetics and the people kind of a lot of stuff comes from here. And I think the illicit market tells you what people want rather than you go to unlicensed stores in New York, I get it locked in there. What do you think of California cannabis? The answer was unanimous, which is California weeds are best, that’s all we sell, right like that’s Florida is closer. Michigan’s floors are closer. Massachusetts, Maine, like there’s all kinds of places where you can get weed.
New York [ph] comes 3,000 miles across the country, you get in California. And I think I don’t think that’s going to change and the walls come down.
RS: So let me ask you about the illicit market. Because, I would say that that’s, I would say a lot of people’s estimation at what the real competition is. It’s not like, fellow cannabis companies, it’s the illicit market. How are you planning for that? Or how do you plan for that? Or how do you kind of gauge growth against something that it’s hard to gauge? Because it’s so amorphous?
GF: Yeah, no, I think you’re spot on. The illicit market is our biggest competitor. And I think if you look at most estimates are that it’s probably three times the size of the legal market. So it’s challenge and an opportunity, right? I mean, the challenge is, you’ve got a competitor, he doesn’t have to follow the rules, pay the taxes, et cetera. Right. The opportunity is, it’s all real demand. And I think we got to — we have to remember that there’s nothing fake about it. It’s just not going through the channel that we’d like to see it yet.
So the real market is I can have 3x Customer growth without a new customer walking in the door just by cannibalizing illicit to license side right. So there’s a tremendous upside opportunity. I can’t reach in California for example, there’s 1,000 dispensaries, right like there. 11,000 liquor stores, there used to be 10,000 dispensaries, most estimates would say under profit payments to the medical market, right.
So we’ve got a 10th of the stores we should have, when we have 10 times more stores or even five times more stores, there’s going to be a lot more happy farmers because you’re going to have five times as many people going through the legal route. I can’t sell to an unlicensed shop. And that means that all those people like — think of Fresno, who just opened up, that was a city of 0.5 a million people, right like that’s a state on the East Coast, Rhode Island, Connecticut, like the bigger than those states. I think we similar size, they didn’t have a licensed dispensary. So that means it was really hard for Glass House. somebody in Fresno would have to drive an hour and pay twice as much money to buy Glass House versus, their buddy down the street that they’ve been buying up for a long time.
Now they’re going to have I think 15 dispensaries, those dispensaries should all do fine. Now we didn’t sell Glass House to Fresno, people don’t have to drive, they can get a licensed product. So you know, I think every time that something like that happens, the world gets a little bit better for us.
The other way that we’re going to really get it though is we’re just going to out compete them. And if you can start to see that happening, we just launched a brand called Allswell, which is that affordable line, that’s a great product at an absolutely amazing price. And as an example, we have our Oswald gummies, there 10, 10-milligram pieces out the door for $11, including taxes. That same thing on the illicit market is $8-$9. So for an extra couple of bucks, you get a product that you know is tested, you know what’s in it, you know that the dosage is accurate.
Like, that’s the way to do it. People will pay up some premium to not drink bathtub gin, they won’t pay twice as much. But 10%, 20%, I don’t think there’s a problem there for most of them. So that’s really what we need to do. And that’s why we’re so focused on flower, because we want to bring up products that are quality licensed products that you’re not paying a premium for versus your buddy with kind of two buds in a ziplock.
RS: So let me ask you a question about one of the kind of broader problems in the industry. I mean, really, this is this is across sectors. But obviously it really affects the cannabis industry. In terms of the capital constraints, like looking at some of the onerous financing that you guys have had to do. Like, if you go to the stock page, if you go to Glass House stock page on Seeking Alpha Wall Street analysts happen to buy, and according to our system, it’s a hold. And one of the most concerning issues is profitability. So how do you speak to investors in this environment as you’re experiencing these real great wins, but then also there are these like, broader concerns? Some of what — it’s kind of like, it doesn’t matter what you do, it’s just an effect of being part of a player in the game.
But obviously, you still have to account for it, especially as a public company. So how do you how would you address investors looking at the stock and be like is now the time — is now really the time to get in? Even if these great things have happened? And maybe there’s more to come?
GF: Yeah, so I think cannabis is a really challenging market. It’s a challenging sector. You mentioned things like the availability of capital, we raised money when essentially nobody else could. We paid through the nose for it. But, I’m a large common stockholder myself. So I put my feet on the ground every morning as a shareholder first and try and figure out what, how do we make employees happy, so they make our customers happy. So we make our shareholders happy, right. I mean, that’s really what we’re doing.
As I mentioned, a large shareholder, so I feel any pain that a shareholder feels. So it’s a very dichotomous world to live and work call it a year ago, our stock was at $10 bucks. And we said, here’s all these things we’re going to do right. Now, a year later, we have done those things. And our stock is doing well, that being only down 60%. I mean, someone told me, that’s performing cannabis, U.S. cannabis stock year-to-date. And that’s the only one that’s like positive, which is an absolutely crazy place to be when in my head, I’m 60%, under where I started. And after having done all these things.
So, I think we’re making really good progress, the market continues to be challenging the challenge, again, is the opportunity because while we’re growing and building, a lot of others are falling to the wayside, which will create opportunity for us market share, brand pickup and plus is a good example. That was an awesome product, top-five, almost in spite of itself, it was a bankrupt company that we picked up for one tenth of the price that Canopy bought one for. And I think now is this great strategic fit synergies with our stores were connected from plant to product, because that’s what’s growing behind me eventually can end up in those in a way that really nobody else can do. We can go strain specific stuff. We can extract it into rosin using our field brand like we can put it on the shelves of our stores. So there’s all these really great, great synergies.
And I think you can — people will be able to see with Q3 the drastic growth in the way that things are actually working. And I think you’ll be able to start to see the path that we’re really excited about where, cashflow positive is not that far away. And again, I think that’s the only route the clock stops putting showing you can make money in California like.
The MSOs are leaving, right like Cresco closed their farm, Harvest closed their dispensaries Select closed their factory in Sacramento. Wana left the state like. They’re heading the other direction? Never mind saying, I think we have a strategy to make money in California, never mind saying I think we can achieve them execute that strategy in this coming year, right? Like, that’s, that’s what we’re saying. And I don’t think anyone else is So, I saw somebody posted something I restrained myself from responding have lost $44 million.
Like, to me last means it’s gone. And I don’t know where it is like, we didn’t lose it. We built like, I’ll show you where it is come see the bar, like this is building an investment for the future. Not it didn’t get on a Super Bowl ad, right. Like, we have the best farm in the entire country. It is 5.5 million square feet, you’ve take everything that truly has after their acquisition of Harvest combined in 20 states. And this farm is twice that big, right?
Like it isn’t the best climate with water and sun and onsite power plants and roof washing robots to grow the best meat at the lowest possible prices and do it at a scale that is unmatched. That’s where that money has gone and has gone into building brands. It has gone into building stores, it’s gone into acquiring stores that other people have built. So that money is not lost, that money is — it’s like a skyscraper right for the first little bit didn’t look like they’re doing anything. Because what they’re doing is they’re building a really strong foundation underground. And then you can start throwing a floor after floor really quickly in a way that no one else can.
I mean, we could turn on another million square feet in six months. Okay, anybody else yours to do, right? And the world’s come in where our farmers can go if you’re feeling really big, really small.
RS: Right? I mean, I think speaking of uncertain texts, I read a text I think it was today or yesterday, were Debra Borchardt from the Green Market Report tweeted that, a company that hasn’t paid its debt is throwing a party at MJBizCon. And it’s like, what are you spending your money on, because some companies have lost it, it is gone.
GF: At some not we’re not, we’re not going we’re not going to be at MJBizCon because we have what we need. And all we need to do now is turn it on efficiently. And that’s like, cashflow positive, we don’t — there’s I don’t see us needing something that we don’t have. We have an ecosystem. It’s getting the stores open, they’re going to open up. It’s getting our operations even tighter at the new farm. It’s developing the brands that we have, it’s continuing to create brands like all as well, like we don’t — we’re not — you’re not going to you’re not seeing us at the trade shows, because we’re here with our head down, making this thing work and focused on profitability.
RS: So speaking of making this thing work, I mean, I think one of the things that would really benefit your business model is interstate commerce. And you were one of the people that I talked to after Biden’s comments came out, and I would count myself at the top of the list of cynics. When it comes to these headlines that come out, I’m definitely picking them apart. And one of the most cynical observers. And your response and what you wrote to me and what I’ve read of your responses outside of that has been very beneficial, but not in a pollyannish kind of echo chamber type of way.
So I’d love for you to share with listeners kind of how you see it not just as an optic based type of announcement, but something that you see as having some real strategy behind it. Can you speak to kind of like Biden’s announcement and how you’re?
GF: Yeah, absolutely. And, I can be specific to in case in point Schumer than the last couple of days out there talking about say it like, that guys had picked us too many times. So I still think saves probably 60% to 70% chance for this year. But I thought that before he started saying it was close, right? So he’s saying all the right things before midterm, he’s not going to face voters again for six years. This will be long forgotten with that guy. I’ll believe it when I see it right now.
Biden and I actually are little bit different, right? Like this is not somebody who’s playing he’s not it. If anything, he was one of the architects of the drug wars, right? Like he is not a pro cannabis guy. But when he campaigned, he said that he would do things for cannabis. And we’ve been throwing pebbles at him for a long time because of by [indiscernible] he hadn’t done anything right. And that was one of the key things, you can find the slides from this deck. He was very — it’s written down. It wasn’t a straight comment. It was this is part of my platform.
And then or whatever that was a few weeks ago, he basically did what he said he was going to do. And I think that to me it was two years later than I wanted. And I’m sure there’s political timing, with the midterms about when he announced it and understand politics to some degree. But I do think it’s a lot more strategy than stunt. And the reason for that is when I look at the — look in a layer deeper, right, so it’s like, some people look at it, and they say, weed is legal. No, it’s happening. And then some people look and say, this is just politics. It doesn’t mean — I think that’s also wrong.
And the reason I say that is if you look down to the people, so he what Biden did is there’s only two ways to legalize cannabis. One is through Congress. 60 votes, partisan politics, Republicans, Democrats, horse trade, all the shit that we know that like freezes things up. That’s not a very optimistic path.
The other path is what Biden kicked off, which doesn’t involve Congress at all. He directed the Health and Human Services Secretary of Health to read go look at cannabis. Right. And he in his statement, he even said, this should not be scheduled more than fentanyl, which means that He’s directing at least a schedule three. If not, were the scheduling right, like he told you where it shouldn’t be. And that’s not scheduled on which is worse than fentanyl, schedule two. So that means three, four or five.
Now, Xavier Becerra, right, there’s not just anybody, Xavier Becerra handpicked by Biden was previously handpicked by Gavin Newsom, as the Attorney General of California, California is the fourth largest economy in the world. So like, let’s think of it as other countries and it’s like U.S. China, Japan, California. So Xavier Becerra was the Attorney General. He is the guy who literally technically legalized weed in California, right, like he was he was the head cop and he signed the thing and said we use weed is legal now. So he legalized cannabis in the fourth largest country on the planet, right like he’s been through. He knows what legalization looks like. He knows the pitfalls. He’s clearly not opposed.
RS: I was going to say, you think he learned the right lessons?
GF: Also, the regulatory side is unlikely in his purview. But if you say, hey, Xavier, do you think cannabis should be scheduled like addictive drugs such as [indiscernible], or do you think it should be treated like alcohol and tobacco? I would say why don’t you have a look at California, where we treat it like alcohol and tobacco with some extra regulation. Like that would likely be his answer, which would be the scheduling cannabis.
So I don’t think that’s an accident. And I think that there’s that was set up intentionally. If you look if — you want even more like obvious intentionality, one of the next steps in there is the FDA. The FDA the day before Biden’s announcement, employee appointed its first ever health cannabis Health Advisory new position. This guy named Norm Biermann. Norm Biermann’s previous job was helping New York legalized cannabis helping Rhode Island legalized cannabis helping Connecticut legalized cannabis.
So you’ve got a guy who’s clearly a pro cannabis legalization guy as the health advisor to the FDA. So you start to look at the pieces on this on this chessboard, and it looks a lot more than just like a hey, let’s say something about cannabis at the midterms. I mean, if you even go over to DEA, which might argue is the scary spot for cannabis. There’s a new director there newish probably a year or so.
Her name is Anne Milgram [ph], I think if I’m saying her last name. And she came into the DEA with one of our missions being to reduce incarceration. If you want to reduce incarceration, the number one thing people are incarcerated for drug possession, the number one drug is cannabis. So if you move into schedule three people don’t get out of jail. If you deschedule it, people get out of jail, right? If you move into Schedule 3, the states don’t really have control, like you don’t get to pick if you want like it. And in Texas, Schedule 3 means generally the federal government regulates. Deschedule it means it all goes back to the states like alcohol and tobacco.
So if you want criminal justice, if you want social justice, get people out of jail, if you want states to have control. if you want the FDA to be consistent with what the FDA does, which doesn’t regulate plants, it regulates molecules that have gone through phase one and phase two trials, the path you end up leading yourself to is not even rescheduling, but deschedule, that’s actually the path and clicks off most of the boxes. I don’t know if that’s what Biden is looking forward. But I do think that’s where the science will be this and the path that flows. The easiest, and has at least some pitfalls is just give it back to the States treat it like alcohol and tobacco and get it off the list.
RS: When you talk to kind of whoever you talk to about this. The political picture. Is your sense more that people are leaning towards thinking that it’s going to be descheduling?
GF: The range I’ve heard is Schedule 3 at worst and the descheduling at best, right? And I think it’s if you — it’s easy to say Schedule 3 because that’s a smaller stuff. But again, there’s a lot of pieces that that’s hard for it. Like, again, no one gets out of jail that Schedule 3. That’s fentanyl scheduled to clearly people I hope are going to jail for trafficking fentanyl, right. Schedule 3 would not be any different. Even the same thing no one’s getting now, it also doesn’t give the states great control. Schedule 3 means that things happen in states whether they want them to or not, which I don’t think makes people happy.
It also puts the FDA in a position that it’s literally never been in before to regulate a plant, the FDA almost exclusively regulates molecules, right. So Epidiolex is an example cannabis derived but distinct from the plant and that it’s manufactured for pharmaceutical companies. They’ve been trials on it, it is a molecule that you can say this is 99%. Here, cannabis has, what 3000 different compounds in it. I don’t even know if the FDA knows what to do with that, right? Like, there’s not cannabis, there’s a plethora of cannabis. And that’s not where they typically go.
So I can Schedule 3, 4or 5 are all actually fairly challenging and have real issues. And I mean, the shaper report, which was back in Nixon’s day, clearly said, cannabis should not be criminalized should not be scheduled at all right? Nixon ignored that. Because, to quote him, he wanted to criminalize the blacks and the anti-war left, right, like that’s why they did it. It’s not because the science took them there. So assuming the science hasn’t gone backwards in 50 years, I’m going to assume the review of the science lands us in the same place the Shafer Commission said, which is this shouldn’t be on the schedule at all.
And by the way, the FDA, the FDA, recommends that that it should not be scheduled, the DEA is obligated to follow it. There’s not like a don’t get a vote. If the FDA says this doesn’t belong here have health insurance and said this doesn’t belong here. DEA has to go along with that.
RS: Are you concerned about like what rescheduling means for the farmers industries involvement with cannabis?
GF: And that’s the other reason I think, like, if they make it scheduled to. What everyone’s going to do, they’re going to ignore it just like schedule one. So you made zero progress, right? Like, no, they’re Feds aren’t going to come in and for some 45 states, because they have different schedule one, schedule two, right. So everybody’s going to keep dealing with it done. It really doesn’t mean much. And I think we’d actually put it’d be more of a conundrum for the federal government. And we’re, you know, versus where the state said the now right, it’d be even muddier.
So I don’t pharma having make farming does molecules, right. And cannabis is not a molecule cannabis is more like you’re in the vitamin and health and wellness supplement aisle, right. And sure, you can extract molecules from that, like on a wet bar, because an aspirin and things like that there’s stuff you can find in both places, but they’re not the same. And I’m not sure the pharma is a plant industry.
RS: Well, I’m happy to kind of end it here. I think this is a lot of great insight. I’m happy to hear kind of any final thoughts that you have for investors? I am interested just because there’s a lot of talk about beverages and stuff like that. I’m interested to hear your take on where you think beverages are going in the next couple of years.
GF: Yeah, no, I think beverages are really interesting. I think they get particularly interesting when people figure out the onset offset issue. And what I mean when I say that is I think the experience people want is a call the alcohol experience where you drink something you feel at 10 or 15 minutes later an hour, after that it’s kind of gone. And edibles right now. They’re getting better on the onset with [indiscernible] and things like that and have higher bioavailability. But usually you consume cannabis, and it’s like 30 or 40 minutes, you feel it. And then three, four hours later, it’s gone. And that’s not that’s not most people’s ideal setup.
So I think when that gets solved, which I think is solvable with beverages, things will take off in that sector. I mean, I continue to believe and I just saw a recent report that backs it up, which is flour. If you think about flour, flour started out as 100%, there was just a plant. So every new thing that comes out takes away flower share by necessity because it used to be 100 years now you’re sliding down. That said as the market grows, I don’t think flowers absolute dollars will dip I think the absolute dollars will continue to go up as the pie gets bigger even if the slice gets a little bit smaller.
So we really focus on flower because if you grow great flower at a great price, all the other stuff kind of comes off and you go great flower we have great smalls that make good pre rolls you have to trim that can be good extracts, you got fresh frozen, that can be buy presents and live rosins and go into beverages and all that kind of stuff. So we aim at the top. If you if you grow great apples, you can make great applesauce, going from applesauce to Apple sauce is much harder. So that’s why we’d like to kind of start at the top of that.
The other thing that’s coming to right. I think interstate commerce was actually much quicker closer than people think. If you think about the path there 100% of the progress that we’ve made in legalizing cannabis has been led by the states. And I don’t think that interstate commerce is going to be any different. Right? It is, it is no more federally illegal for me to ship something to Los Angeles, as it is to ship it to Las Vegas, Nevada, right? Exact same federal laws.
The Cole Memo, which isn’t even technically in effect, kind of said, Hey, if you’re compliant with your state’s laws, the federal government’s going to leave you alone. So California has an interstate commerce bill now, Oregon has one New Jersey introduced one. Use Nevada is an example of Nevada was willing to accept California cannabis, which I think there’s a lot of reasons that it would we can ship compliantly out of California and receive compliantly in Nevada, and consistency for the federal government would be to treat it just like it treats interstate operations. Because we are compliant with both the shipping and receiving we’re compliant with all the states. So I wouldn’t be surprised if we see an interstate commerce transaction happen by the end of next year, which I think is much sooner than most people are thinking that it was. So that obviously I think there’s no better beneficiary of that than Glass House, because we’re made to win in California, and then when the walls come down and be able to extend that across the rest of the country. And I think that gets a little bit closer every day.
RS: So let me just ask you really quickly, let me pick apart like how you see the timeline going? A do you see like next week, November 8, do you see more states establishing more legalized footprints A and B, do you see Biden setting this up as the finish line is two years from now? And he’s kind of going to pass the baton to the next Democratic nominee?
GF: Yeah, I mean, I think I think we have five states on the ballot, a ballot on the eighth. My guess is the four of them are probably going to go which is, which is awesome. Right. I mean, it’s just every, and that’s another 10%. Right. And so it’s like the pace is pretty feverish right now. I do think playing politics, I think Biden announces that the midterms for political reasons, and I think he said he wanted it done quickly. And you’ve seen Xavier Becerra, echo that back that they’re working on it.
Clearly, they’ve been putting the pieces in place with guys like Norm and things like that beforehand to make this happen. There’s a lot of studies out there, so they don’t need to do new science. And I would think that for, again, for political reasons, what he would love to have as this thing done by the next general election in two years. I think he’d like to have it as his legacy. It’s a win for so many, right? It’s a win for progressives who want to see cannabis legalized, it’s a win for social justice, getting people out of jail, pardoning people, it’s a win for business.
This is a whole new industry of jobs and taxes. It’s a win for states rights, right? Like, there’s really and that’s I think, part of the reason you see it pull so., Nine out of 10 people want cannabis of some time, across party lines, I think was like 76% approval for what Biden did with the pardons in the rescheduling? I mean, answer dough stuff, but like, that was the most like we never had.
I don’t think that every other politician is not watching that. Now, if the state answer if I’m a politician, you say, what’s my stance on analyst says I think we should legalize. I don’t even think that was true. Three months ago, three months ago, it was probably I support looking at right now. I think people vastly underestimate the moral power of the presidency, right? Whether you like the person that the politics of the party or whatever, it is the office of the most powerful.
It’s the most powerful office in the planet, and all of a sudden, and provide a tremendous moral political air cover for people to ship their position. And I think it’s a good, same sex marriage to me as someone who’s a good parallel, which is, I think a lot of people were okay with it, even though they weren’t saying until Obama or, you know, other folks came out. And then they said yeah, I agree with that. And then they realized everyone else in the room also agree with it, and it went really slow and then all at once.
And I think, things like a [Indiscernible] came out yesterday saying that he thinks many federally legalized so that we can ship California weed across the country, right. Back to that the President said that now means he’s that it’s major, right? Like, Biden is not pro cannabis is not anti-Trump, he’s not throwing the work opponent. And he’s saying that this is wrong, right. Like, that gives people a lot of room to maneuver. And I think things are going to go quicker than most people think.
RS: Well watch this space. It’s certainly interesting. It’s certainly interesting. I think you make really, really compelling points even person like me. So happy to be in touch Graham, and thanks for sharing with us all your insights, hard earned and well thought out.
GF: Yeah. My pleasure. Thanks a lot for having me. Yeah great to be back.
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