Interview with Mitch Meyers, Owner of BeLeaf Medical | CBD Business Insights

Backed by an impressive resume of achievements in the marketing field, Mitch Meyers brings a fresh perspective to the cannabis and hemp industry.  After spending several years in the accounting and audit field, Mitch realized that marketing and product development was her true calling.  She was hired to introduce Bud Light for Anheuser-Busch, which is now one of the the largest selling beers in the world.  AB subsequently put her in charge of leading their new products group for 6 years. She was named AdWeek’s Advertising Woman of the Year in 1996.

After leaving there, she and her partners formed a marketing and brand development agency, The Zipatoni Company, that worked with many Fortune 100 companies delivering strategic insights and business development programs.  She and her partners built the agency to 350 employees, offices in 5 states and $42 MM in revenue annually.  They were acquired by IPG, the Interpublic Group in 2003.

Since that time she has entered the cannabis industry receiving a dispensary license in the highly competitive Illinois medical market in 2014.

The following year, she received a cultivation, production and dispensing license in Missouri for CBD to treat Epilepsy. In 2019 she and her partners received 10 licenses in Missouri in the medical cannabis market.     She continues to consult with companies around the country on cannabis business.

Mitch’s seasoned marketing expertise, coupled with her passion for the plant, products and the ultimate patients, makes her one of the leading faces of the cannabis industry. 

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About Steven Denny: Steven Denny co-founded Innovative Business Advisors in 2018 and serves as a Managing Member of the firm. Steve has been actively engaged in M/A activities in a wide variety of industries for the last 14 years and has developed specific products to assist clients in growing their profitability and enterprise value. His specialty is working with established private companies in the lower middle market with annual revenues from $1 – 50 million.

Transcript

00:02

Welcome to the You Don't Know What You Don't Know podcast by Innovative Business Advisors. Successful business owners who have started grown and led businesses share their journey and direction for the benefit of those traveling the same path. Today we're talking with Mitch Myers, founder of BeLeaf located here in St. Louis. Born and raised in Southern Illinois, Mitch graduated from SIUE. She originally worked in finance, but migrated over to marketing where she soon found herself at Anheuser Busch. While there she led the launch of Bud Light and introduced the world to spuds Mackenzie, following a very successful career in A&B Mitch ventured into the entrepreneurial world with the establishment of Zipatoni marketing agency, which she and her partner eventually sold to the Interpublic Group. And by the way, IPG is the fifth largest advertising agency group worldwide.

00:56

Mitch then devoted herself full time to her family and moved to Colorado. While there she became aware of CBD in the cannabis industry. And that started her on a journey to where she is now co owner of one of Missouri's only vertically integrated grower manufacturer and dispenser of cannabis derived products. Mitch, welcome. We're honored to have you with us here today. Thank you, Steve. I'm excited to be here. Well, we're very excited to have you you've had one heck of a career in many different industries. Yes, I am. Yeah. And now you are back in Southern Illinois full time. Yes, we are we we moved back there after my kids were out of college. And we live in Edwardsville. Just across from St. Louis. Yeah. Fantastic. Wonderful. Well, so tell me about the moment you decided to get into this, this crazy cannabis business.

01:47

So I did not grow up a cannabis kid. It really wasn't in my purview as a young person. But when my kids got to college, they went to Boulder, Colorado. It was about the time that medical cannabis had been approved there. And I was fascinated with a brand new industry, you know, starting up and I started to see stores opening and I went in and was asking questions. I found my way to a couple of the growers who were, you know, really nascent at the time and just getting started, everyone was so friendly, so welcoming, they would show you how they grew their products or how they manufacture things. And I just thought it was fascinating that an entire industry was springing up, you know, before my eyes, and usually in a lifetime, that doesn't happen. So about the same time the state of Illinois was looking at a legislative measure to bring in medical cannabis. And it takes a very long time. But they finally got it passed in 2014. And by that time, I had moved back and I was approached by a few investors to see if I had an interest in participating. And I said I did, I had met a couple of caregivers, that were actually treating patients directly. And I was watching them with epilepsy patients, people who had various kinds of cancer and having great success with a real simple preparation of an oil coming from the cannabis flower. So we put together a team and had to go find real estate. That was interesting back in 2015. Because in Illinois, you know, the Midwest is very conservative. I got thrown out of a few courthouses. And you know, one place in a small town, there were 200 people that showed up to oppose me for getting a zoning license. And truthfully, by the end of the meeting I had, I had sold them all on the benefits of it. And they allowed us to apply for a license there. We were fortunate in that we got one license, it happened to be up in the Chicago area, one license for dispensing. So once I got that built out and staffed, I was able to really observe who the patients were, why they were coming, what they were treating. And again, in Illinois, it was very restrictive. There were only six very critical, you know, diseases that you could get a med card for at the time. But you know, what really blew my mind. At one point, we had about 1000 medical patients in our in our store, and I would say 40% of them were there to detox off opioids. So, you know, cannabis is used for chronic pain a lot.

04:38

You know, it's also good for a lot of other things and the different terpenes in the plants. I mean, it's a magical plant. I mean, it was put here for a reason. And you know, we're just now after 85 years of prohibition, being able to study the plant and all of its, you know, chemical compounds to know you know, what works on what particular disease state.

05:00

So that was really exciting an eye opening for me. And in 2015, the state of Missouri offered two licenses to grow, manufacture and sell CBD oil to epilepsy patients. So I applied for that and got it and then had to learn how to grow. So I found a cultivator from Denver, he had originally from St. Louis, moved to Colorado to join that industry. And then when he heard that Missouri was opening up, he moved back to being near his family, and I was able to bring him in as my cultivator. So we hired a chemist who helped us figure out how to extract you know, and get the oil prepared. And we started treating epilepsy patients, which has really been,

05:49

that has been a stunner for me to see what this simple oil preparation can do, to stave off 50 to 300 seizures a day in everything from five month old kids to 97 year old people that we've treated. So being you know, we were really then one of the first operators in cannabis. CBD comes from the cannabis plant just doesn't have high THC in it.

06:15

You know, I realized that the state was interested in bringing medical to Missouri. So we worked with an organizing group that I think it was called Show Me Cannabis at the time. And we worked with them and put together a trade association to bring everybody to bear who might participate in this industry. So we brought the business people who wanted to get a license, perhaps we brought in bankers, I was able to give tours and show them my facility and show them how controlled everything was from seed to sale. We brought in lawyers and policemen, you know, anybody at physicians who were going to have something to say about it, positive or negative, and we were able to give them a look at the display home, we call it which really benefited I think the program in total. But fortunately, we were able to get a medical bill passed in 2018. And after that, the Department of Health has to write up all the rules and regulations, which they did. And then I put together a bigger team of people, because it takes quite a bit of money to apply for all these licenses. So we went out and started looking for real estate to get it under control. We were you know, looking at the financing portion of it, how would we fund this if we did get licenses. And so we applied for the maximum number that one ownership group could own, hoping that we would just get one of each type of license. So having a vertically integrated license is pretty important. So that you can grow your own product, you can manufacture the products that you're interested in selling, and then you can resell them through to the customers. So the day they were announcing licenses, you know, our partners are spread out all over the place, we are all on our phones and getting emails from the Department of Health, we ended up getting all of them, we ended up getting all 10.

08:16

And I tell people, it's like the dog that caught the car.

08:21

You know, I was doing a happy dance for about 60 seconds. And then I'm like, Oh my gosh, how are we going to find the money, you know, to fund this. Because per the rules, you had to be open within 12 months, they didn't want people applying for licenses and then just trying to resell them. So you know, that was a good idea. But it was difficult to execute. Because finding that much money, putting it all together. And it was the start of COVID. So construction really got slowed down with you know, supply chain issues. But we were fortunate we got it all up and running, we opened up a percentage of our cultivation operations just because in the beginning, you don't need that much product. So now, two weeks ago, at the election, the people in the state of Missouri voted to approve adult use, which means starting February 7, you will no longer need a medical card to access cannabis. And that you might think that it's really no big deal. It's not that hard to get them. But people just don't really want to go on record and have a card a lot of times they feel like oh, my employer might find out or I can't buy another gun. Because if you're filling out a gun application, you know, you don't want to lie about that. So we know that there's probably a three to 5x increase in business once we can open to the adult use market in February. So we're a full knit group.

09:55

Yeah, so it's kind of like you're going back through that whole explosion process again.

10:00

and right with this with this new opening up in February, right, and I tell people be careful what you apply for you might get it.

10:09

You have to execute.

10:11

Well, and execution is the is the key thing. It's, you know, it's not necessarily having the great idea, right? It's, it's, it's about having a great idea and then finding the capital and then actually executing to make it happen. Absolutely. And, you know, I have seen a lot of people fail people who were well intentioned, who had access to a lot of capital. And this isn't, this is a very difficult industry. You know, everybody thinks that, oh, you're in cannabis, you're just getting rich. You know, I haven't seen a nickel yet. I've invested a lot of time and money. And you hope that on the back end of it, you know that there's a rainbow. But it is very expensive to be able to put together these cultivation and manufacturing operations, because it's extremely controlled. You know, we everything has to be tested, coming and going. Everything is on camera, you know, some of our facilities have 250 security cameras that have to be monitored, and then the on site security that you have to hire, you know, the amount of people we're up to about 150 employees at this point. And I'm sure we'll be well over 200, once we're fully staffed for adult use, which is my favorite thing about the industry, honestly, all the new jobs that are being created. They're good jobs, they have benefits associated with them. There are so many people that love this plant that are so excited to be able to work in this space.

11:42

We're actually working with St. Louis University, putting together a program that they've been running the last two years, and it has just, it's been the most successful new program they've launched. In many years, they have so many students,

11:59

which is great for the industry, we need trained staff, because you know, we haven't really had it before. We're finding people moving here from all over the place that have worked in cannabis. But having SLU have a program like that, and to be able to, you know, pluck these people out with good experiences. It's great for the industry. It's phenomenal. I was astounded when I read that. So as I was doing some research on that was one of the things that kind of set me back in my chair, and how did you how did you come to even bridge that that potential opportunity? I mean, getting SLU the, you know, one of the top 25 educational institutions in North America to agree to put together a program for this industry, this brand new fledging industry, which, you know, in many regards, people are afraid of because the federal government, you know, still

12:56

still has a heavy degree of control over it. Right? Well, you know, I mean, well, when I first started in 2013, it was a lot worse than it is today, you know, there are so many states that have gone, we've passed up the federal government, we're waiting for them to catch up with us. But you know, I have just seen such a sea change in people's attitudes, you know, once they have access to this, people understand, it doesn't matter what side of the aisle you're on, if you're religious or not, once you realize this plant can help people. You know, it's like, why, why is this being withheld from us? So things have really changed quickly. But when we were prior to us getting all of our licenses, we realized that trained staff was going to be, you know, a huge gap. So our particular team, we had a man who had been in education for many years, and I had met two college kids that were just graduating from Ohio State that had created this cannabis school in Ohio. And they were they were killing it. So I sent this guy that worked for us out to Ohio for two days to study what they were doing. And I said, Look, we can set this up, you know, we have additional space, we can pull this off, we'll get the cream of the crop, right? The best kids coming into our shop. So he went studied it, we put together a business plan. And at about the same time we got our licenses and I said you know what, we can't do it all this isn't our core competency. I don't want to be you know, run a splitting hairs here and running two different things. And I had met with some SLU research people, they approached me in the CBD space. Unbeknownst to a lot of people. There was a SLU researcher in 1999, who was involved in the discovery of the endocannabinoid system in the human body. So there is there's a man in Israel

15:00

Um, Raphael Mechoulam, who basically mapped the

15:06

he mapped the THC strain to understand what was giving us that, you know that feeling that high feeling. So we knew that THC was the actual compound that gave you that euphoric effect. We didn't know how it was working within the human body. So we all have an endocannabinoid system, we produce cannabinoids. And when something goes wrong, like when we're out of balance, or we have stress or disease is present, that gets out of whack, just like your immune system does. So their researchers were involved in that. And they said, We want to stay involved in cannabis research. So I was working with them with CBD on a

15:53

Alzheimer's mouse model study that we did just with CBD. So once this school thing, we were going to pass on it. I said, Hey, you know, would you guys be interested in doing this? You know, not thinking that maybe they would, and they jumped on it with both feet. They been tremendous, Stacey Gotalasky is their director. And you know, they've already got a system that communicates with the whole country on offering these kinds of classes. So they were able to go out and say we have this new cannabis, you know, instruction, they had hoped to get 35 or 40 students. And I think they've gotten over 400 of them. And, and she told me the stats, the youngest student was 19. The oldest was 82. And I think they had they were in 35 states.

16:51

Incredible. Yeah, absolutely amazing. So you know, it's clear to see what makes your business special and different from others. I mean, you guys, you've said it. So well, when we first started here, you you're a brand new industry starting up really complete new industry and the company in the in the country as a whole. With all the things that you've accomplished in, you know, almost 10 years now, what are you at right at in nine years in this thing? What do you

17:25

what are you most proud of so far? I think what I'm most proud of is, first of all the help that we have given so many of our patients, you know, I mean, these people are like, You saved our lives. And it's like, I didn't do anything, I was just able to get you the oil or the product. So that, you know, you feel like you're in health care. And one of the things that I've recognized in doing this is that, you know, our healthcare systems broken, and people who have these chronic diseases like intractable epilepsy, so many times, you know, their body just starts to attack itself. And they have, they have three or four other things wrong with them as well. And these parents are so desperate to talk to people who will listen, and you know, who can potentially help them. And, and in talking to some of these seizure moms, you know, they come in with entire calendars to tell me, you know, Mila had five seizures this day, and she had 10 this day, and then we started giving her the oil. And then she had none for 11 days. And then she had, and so you know, this becomes their life, it overtakes their life. And so when they have someone that will spend time with them, actually talk to them and listen to them. You know, it's so helpful. And I know that our medical system, these doctors just don't have time. And it's like, well call the doctor's office, you may not hear back for two days. And when you have a child that's having a status, grand mal seizure, can't deal with that. So you know, that's one thing that I've learned. The other thing I'm really proud of is is the number of people that are being employed in the industry, and our staff and the level of talent and the development that we can give to them. Because this industry is not it's not just happening in the US, it's global. So some of the bigger companies that started many years before us, you know, they may be in a dozen states in the United States. Germany just announced that they're going to go adult use. Europe is starting to open up. So you know, this is going to be a global industry. There's going to be good jobs associated with it. You know, I there, the guys who were growing in the black market in California, the good growers who were illegal for 20 years are now rockstars in our industries, these guys can make a quarter of a million dollars a year and they're getting you know, poached by people all over the country. So

20:00

It's just fascinating to me, as I said, you know, when do you ever get to be part of a brand new industry starting up and you get to be part of, you know, the rules of the road, like, there, a lot of things aren't defined for us. And we're having to figure it out on our own, you know, and be part of the history of it.

20:20

It is fascinating. Having visited one of your stores, I was, I was struck by a couple of things. First and foremost, the attention to detail on the brand was was really striking. And I'd love you to talk about that. But I think the thing that was even greater than that was the enthusiasm and knowledge of the staff at the store. I mean, they were all about customer education. And, you know, I would ask him a question about something and they you just see him light up and go on about, you know, what made that particular product special and different than other things that were laid out there. And they, they just the fact that you touched on this earlier, this staff is so committed, and so engaged and so knowledgeable about the product, you just don't see that anywhere these days, right?

21:16

Well, that makes me really proud to hear you say that, because that's what we strive for. And I like to go to our stores myself, you know, we have a lot of new people that are coming in rotating through stores. And, you know, sometimes they may not know me, and I will stand and listen to how they talk to a customer. I was so amazed the other day, I was at the Cherokee store, and one of our young men was talking to an older gentleman who was a veteran. And they were just getting into the nitty gritty details about different terpenes that worked for him and not and when the customer left, I went up to him and I said, you know, that knowledge is just blows me away, first of all, and you know, there's no books that teach you that I said, How are we, you know, how are we circulating your knowledge, what you've learned, and other people to the rest of our staff.

22:10

And he said, You know, I just really listened to my patients. And he said, I have a lot of veterans that come in here, and they're, you know, certain things they can't tolerate, and I really pay attention, and I make notes about it. So you know, that kind of commitment. And again, these kids know, they're really helping these people. And that gives you such a sense of gratitude and, you know, gratefulness, that somebody can come back and say, wow, you know, I'm sleeping again, or that pain in my hip is completely gone. And I didn't think anything would touch it, or I'm off benzos you know, the people that want to be off opioids, you just, I'm happy to see it, because they're so dangerous.

22:53

You know, and that part makes me angry. Like, why would the government say that we're still federally illegal, but you can get those all day long that you know, something that can kill you. So, you know, happy to hear you say that about our staff. You know, we we test them every day. And I want our customers to do the same in terms of the branding and the look and feel of the space. As you said, it still isn't intimidating. And to an older customer, for sure. I think they feel like they're going to walk into a Cheech and Chong, you know, Headshop. And my first dispensary up in Chicago was called Nature's Care. And I, you know, I went really out of the way to make sure that people felt very comfortable, you know, there's comfortable seating, there's, you can sit and have a cup of coffee, you can read information about products that we sell. And, you know, I we had an open house prior to opening the shop, and all of the local people that lived around us came, because they were nervous. They're like, what the hell's going to be going on here who's going to show up? And, you know, they said, it was interesting, because they sat down on the couch, and they said, I feel so comfortable in here. It's so relaxing, people are so nice. And it's like, that's the exact effect that you want to have. You know, in a facility like that you want it to be welcoming, and professional and clean. And you don't want it to look and feel like a doctor's office. But you also don't want it to be you know, too head choppy because that makes people nervous. Without question. Yeah. And it's, you know, a couple of things. We we work with a lot of startups and a lot of small business owners and you don't get the feel of that when the marketing is done. Right. But I think the thing you touched on a few minutes ago is so important. I want to restate it. Your your employees tend to believe and live the vision and mission of your business. And so many people when they're starting businesses, we find that they forget that very quickly. They forget what their vision

25:00

Mission is they get so they get so busy in the execution that they forget the reason for being there. And that doesn't seem to be occurring in your industry. Right. And, you know, they're, it's a special person that wants to work with the plant, and they really believe in it, they believe in its potential, and they want to see it become more mainstream and be accessible. You know, I can't tell you the number of older people, you know, their kids, like, I know their kids, and they'll call and say, hey, you know, my mom has Alzheimer's, and she's in a nursing home is there anything we can give her and I'm like, these gummies are working great. You know, it helps them sleep, it calms them down. Well, you know, my phone rings off the hook with people wanting help. And they just, they don't know how to go about it. And that's why when it becomes adult use, it's you don't have that, that hurdle of having to figure out how to get a medical card, you know, their kids can just walk in, and we can help instruct them on what's going to work for them. One of the other things that I'm really proud of on the branding is we we did absolutely everything with local vendors and contractors. And then even you know, we have little wooden benches, it was made by an artist that takes old reclaimed wood, down at the, at the Lemp at the Lemp Brewery. We had local artists from each, you know, City area, come paint a wall, or on at the Grove, the entire front of the facility was done by local artists, our architects were local, our contractors were local, our, you know, electricians and security. And I know a lot of these bigger companies just brought in resources from Nevada, or Colorado that they had used because they knew how to get it done. And we didn't we were very prideful about using local people for absolutely everything.

26:55

That's awesome. Sure, that's been a blessing to that community as well. We feel like you know, they all have relationships and, you know, people that follow their work. And you know, it's it, we got eyeballs on us probably through through our suppliers as well.

27:12

That's incredible. Well, you've had a lot of success so far. And I know that mixed in there, you probably had a couple of failures here and there. So to share with us, if you will, one or two of the biggest failures you guys had to encounter and what you learned from it, and how you had to, oh, we're gonna need more time.

27:34

The first one was not anticipating that we could potentially win all those licenses. What a huge thing you didn't dream big enough. No, we didn't dream big enough. And and I remembered seeing investment debts from other people in the market. They were projecting that they were going to win all those licenses and would need all this money. And I was just shaking my head like, what are you crazy, like, you know, your betting going to happen? So the problem was, you know, once we won all the licenses, we had to change our business plan, we had to you know, redo all of our pro formas redo the subscription agreements, and that all took time.

28:16

So that was the first fail. The second one was, I don't think we you know, because we were always sort of hand and mouth with money. We didn't have a source where we could just go get $60 million, you know, questions, no questions asked. And we're very careful to not over promise. So we didn't want to ask for any more than we thought we needed. Well, you know, I would recommend to people ask for twice as much as you think you need, because it'll take it. And then the third thing was our equipment. I don't think we right sized our manufacturing equipment. Because again, we thought, Wow, do we really need a quarter of a million dollar packaging machine? Couldn't we do that, you know, with something smaller and labor will Yes, you can. But at the end of the day, once you get to a certain level and a certain scale, it makes more sense to have that more expensive equipment. So we probably spent money on equipment that was too small for us, that we're now having to turn over and buy the bigger stuff. And I think with Rec coming, you know, the demand for the products are going to be there and that will pay for itself quickly. Was, I'm wondering and I don't know the answer to this. Was financing an issue. I mean with

29:36

you know, I went to the California stores and the Colorado stores a couple of years after it was legalized and one of the things that struck me was it was solely a cash business and it's a lot harder to run a cash business. Just finding a bank that would take you know all those cash all the amount of cash was a was a challenge for people in Colorado and California when that

30:00

We're starting, has that changed? Well, you know, again, as cannabis becomes it comes to more states more banks have gotten braver in putting their their toe in the water. You know, I told you, when I had the CBD business, I would bring bankers in to show them really how regulated it was. And I had the president of Triad Bank in my office, and he said, this would be the most regulated business I bank, why wouldn't I do this, and I said, You should do it. And it would be a great, you know, point of difference from you, for you from a marketing standpoint, if you get in. So he is an in state, you know, chartered bank, so it's a little easier for him because they don't cross state lines. But they spent six months doing due diligence on how to get it done. And they, they actually had to change some of their correspondence, banks didn't want to participate. So they had to get different ones that would, but I'm telling you, Triad is banking, most of the major players in the state doing an outstanding job, and their business has really grown as a result of it, and they could not be more excited. Now, we're hopeful. And we heard at a conference last week, that Congress potentially will pass the safe Banking Act between now and the end of the year. And if that happens, it's going to help so many people, you know, all the risk in the system if you have to deal in cash, right? So, you know, we have never had to from the day we opened, basically, that they have a person that comes by and picks up cash, takes it directly to the Fed gets deposited in our account. And you know, it's very easy. We can wire money, nobody, we can pay in a check or we can wire so there isn't a lot of cash setting in any of our locations. We also have a debit card system that people can use in our stores. So we don't end up having a lot of cash in the dispensaries. And I'll be happy when when no dispensary has to deal that way. Yeah, it just makes things so much more difficult, right? You don't realize, you know what, what it would be like in that regard. It's a terrible risk. I watched Colorado and watching those young people having to take all that money and take it to the bank. There's no way I would put my put anybody on my staff in that position. The most amazing thing for me was we went to the Tax Office, the day when people would record bring in, bring in their tax receipts. And and people would show up with suitcases full of cash, surrounded by off duty police officers walking them into the tax office to make their tax payments. It was the most it was like the wild wild west all over again. I'd never seen anything like it before. Well, and now they charge you a penalty to pay in cash. Not only do they not allow you to bank, they charge you a 10% penalty to pay them in cash. Unbelievable. Yeah. So it's yeah, it was fascinating when you said that I know. Triad Bank is, you know, to be applauded, they're they're a real leader in that regard and amazing industry. But when you're looking at financing and financing equipment and things like that, I mean, are traditional, you know, a lot of small businesses will use SBA financing for up to 5 million was the SBA is not even available to you. That's available bank financing is not available when you're cannabis touching. So it's private equity. You know, we have to go to family offices.

33:42

Another thing I'm really proud of our first seed capital investors that weren't, you know, us like the people that started the company,

33:53

were three physicians out of Kansas, my phone rang, I had no idea who they were, they wanted to get involved. They have just been, they’re pulmonologists and they, you know, truly believe in it, and they're happy to be involved. So, you know, it really is, you know, you got to start with family and friends to get going. And then if you get licenses, you reach out, you know, there are now brokers that are putting together, people who have money that want to get involved, a lot of family offices are really going heavy in cannabis. There are other companies that

34:29

that will loan you money, but it is at such punitive rates. I mean, it is it's 13 to 18%, which with all sorts of covenants on it, that you have to maintain so much cash, and sometimes you have to go that route to keep moving. You know, if you're in the middle of construction or you have to build out, you know, a cultivation operation and it has to be open and operational. You have to take those debt commitments but they're incredibly painful and it's

35:00

Because banks can't lend, if Safe Harbor passes, banks will be able to lend. And that's going to bring all those payday loan guys rates down, because they're just not going to be able to get it. So that'll be really helpful to the industry. The other punitive thing is something called 280E. So the federal government says, if you are selling something that is illegal, you basically have to pay taxes on everything except your cost of goods. So at my dispensary, for example, if I pay $10, for something, and I sell it for 20, I can deduct that $10 Cost of Goods, I cannot deduct any other normal business expense. So all of my payroll, my rent, my insurance, you know, interest, any other other operating expenses, all my operating expenses are 100% taxable. So, you know, again, you know, people think it's such a highly lucrative business, you really need to look under the hood and understand the business model, you know, to know how you can be profitable at it. And, you know, hopefully, again, if the Feds would, you know, basically take it off schedule one, or, you know, basically say, we're out of the can, out of regulating cannabis, that 280E should go away, we shouldn't be treated like any normal business and be able to deduct our business expenses, that would give everybody a huge boost just immediately. Yeah, that's a pretty well kept secret. I didn't know that about the business as well. So yeah, it's painful. That much, I'm sure I'm sure it is painful. You know, and, you know, the black market doesn't do any of that. They don't, they don't do any of the testing, or the security or 280E business. So, you know, and we compete with the black market. I mean, I heard last week that, you know, 80% of all the cannabis sold in this country is still coming from that legacy black market. And 20% is in the newly regulated, you know, industry, which there's 40 states participating. So that shows you what the opportunity is what the upside opportunity, and all of us are, our goal is to try to stamp out that black market or reduce it, because you just don't know if somebody is growing and using pesticides, they don't test their products. You know, we've got a sticker on absolutely everything we sell with the test results on it. So you know, people, especially people who have medical issues, shouldn't be messing around with the black market, just not knowing what could potentially be in it. Without question, and things like growing. I mean, we don't, we're surrounded by farmland here in the in the Midwest, right, what I call the mid best, and, you know, but you guys are not growing that way. You're primarily in indoor farming, if you will. We are indoor farming. And part of that is, you know, we have, we probably have too much humidity in Missouri to be able to grow outdoor capably. You know, I've seen some amazing farms in California in Humboldt County to grow beautiful organic cannabis outside. And it's so much cheaper than the amount of money it takes us to grow. But we can guarantee that we could turn that building five times a year. So once you invest in that building, you can get, you know, a pretty highly profitable crop, and you can get a five times turn, you just have to make sure that you've got good growers and you know, you're aren't doing anything that's gonna harm or kill the yield on those plants.

38:53

But it's significantly more expensive upfront. I mean, you got to have the building, you got to put in the hydroponics, you got to put in the systems and so forth. The lights and utilities, lights on. So absolutely. I mean, the regulated market is going to be a much more expensive product than somebody that's just growing it outside and, you know, putting it in a baggie and shipping it across state lines. Yeah. So you guys are beyond the startup, you're you're beginning to operate in this. You've got you know, regulatory hurdles like nobody's business, even everything that moves in and out of your business, the product, the money, everything has to basically move in and out in a fully controlled scenario, right? I mean, you, you, you, you guys, there's a whole transport system to move product in and out these days. There is and there's a whole distribution system that has to have a manifest. You know, when a van takes off with your product, let's say it's going to stop at five different locations. There has to be a manifest on board. The Department of Health has to know what that manifest is.

40:00

So if you got stopped by the cops for any reason, you know, you would have that manifest on board, our delivery vehicles have to have security cameras. You know, there's lots of restrictions on that. The the I told you the numbers of security cameras that we have, the Department of Health has remote access to those. And we have gotten emails from, you know, some of our our DHSS,

40:28

people that will say, hey, you've got a, you've got a plant that fell down and camera in flower room 2 at Cherokee, and it's blocking the camera. So they're watching.

40:41

Everybody's watching, everybody's watching, right, talk about living under the microscope. Right? Well, and then I mean, it's what people don't realize is, you know, once once a plant is harvested, let's say you have one cannabis plant, and it's harvested, it's got a lot of waterways in it. So that plant has its own unique identifying number, and that's in our computer, and the state knows that, that and they come and they do, you know, they check on us from time to time and do audits. So that plant then when it's hanging to dry, is going to lose about 80% of its weight in in water. So each time you touch that plant, and it moves to the next stage, it has to be weighed, and you have to enter the water loss, and then you ended up with dry material, and then that dry material may go to your manufacturing facility that then is going to get extracted and turned into oil. So all of the record keeping to follow that plant from the time it's a seed into whatever, you know, oil it ends up in, or gummy or chocolate bar, they know exactly where that went. And the whole point of it is diversion, right, they're trying to make sure that we're not diverting half of the material that we have in our facility. But it takes a lot of people and a lot of time and you know, our we're going through in a financial audit right now. And the accountants are having a hard time keeping up with, you know, all of this data entry stuff, and you know what, what comes out the end, we actually sell,

42:20

I can only imagine, I mean, you are really in the big data business, then as I listened to you talk about this.

42:27

And there's a lot of, you know, picks and shovel companies that have sprung up around cannabis. You know, the software companies, extraction machines, some of this stuff came out of the pharmaceutical industry, but again, for them, it's all new, it's a brand new marketplace, you know, for them to go. And it's really fascinating, like, once a year, there's this large conference in in Las Vegas. And the amount of equipment, you know, that has come online in the last 10 years is really mind blowing, you know, to make something grow faster, or LED lights to, you know, so that it's not as hot and you don't have to use as much utility, even the utility companies are in the game trying to give, you know, rebates if you use LED equipment. So everybody everybody's jumping in because it's you know, it's just the new new thing. That is going to be a huge industry. What do you what do you see as the biggest challenges that you guys are facing today? And what do you see in the future as some of the biggest challenges that that your industry is going to have to face? Well, I think,

43:35

you know, what I what I like to see as states adopt a program is that they go medical first, you know that if they first have a medical program, they and it needs to be limited licenses. So if you look at the state of Missouri, we did a pretty good job of you know, limiting those licenses, the state of Oklahoma did not, okay, they probably have 10,000 licensed producers in manufacturers and and dispensaries, which is about 9500 too many. So, you know, that's going to be a it's a problem, because nobody's making any money. You've got people that are, you know, trying to ship it to another state just to cover the the investment they've made, which harms places like us or other states contiguous to them, Texas, I'm sure it's getting a ton of it because they don't have a program. So you know, those of us in the industry that has ever invested all this time and treasure, want it to to grow up, you know, we want it to be legitimate, legitimately run businesses. And when you have rogue states like Oklahoma, that's not helpful, you know, because that product is going to end up where it's not supposed to be. And it's going to get somebody in trouble in another state and it just sets us back

45:00

Back in the minds of people that are starting to reconsider. So that's a challenge. You know, money is always a challenge, you know, as you're growing, it just takes a lot of capital to do these, to put these businesses together, you know, maintaining our staff, and keeping a good culture and a knowledge base, like you saw in our dispensaries, making sure that everybody has that enthusiasm and that knowledge to be able to help patients. And these are typical business problems, you know, they're not unique to cannabis. But it's just like every other business, you have to be able to execute well, then the opportunities are, you can either expand to other states on your own, and some people are doing that, or you can look to be acquired, you know, so if you're, if you're sitting in a state, like Missouri that people feel is a good cannabis market, because we have limited licenses. You know, I think there's going to be, you know, acquisition offers coming along to people like us.

46:09

Yeah, the one thing about private equity and private, private investment and family offices, is they know how to move money around pretty well, they're pretty good. And, you know, I've just learned that there's a lot of money there, you know, there's a lot of private money that wants to deploy in things like this. You know, in the beginning, we, I did a lot of speaking to chambers and YPO groups, just to get them to understand what it was and to stop being afraid of it and to get them to go out and vote. And, you know, I would run into people that would say, hey, you know, my buddies and I, at the country club, have a little, you know, fund and we think we want to get into this and you'd spend four weeks, you know, kissing the frogs, I would say, and then they come back and say, Oh, no, my wife wants a condo at the lake. So I'm not going to do that.

47:01

So I'm like, Okay, we gotta we've got to step it up and move into one of those family office funds, where there's professional manager, yes, they want to, you know, be in cannabis. And then we can start the tap dance.

47:15

Do you think that the some of the public companies that are in this space, you know, they've, they've kind of experienced what I call the sawtooth, some ups and downs, if you will,

47:26

as this industry matures, you must be very confident you're going to be able to get your money out, do you think that this is going to find an appropriate level where returns will normalize and people will be able to see, you know, the, the the

47:43

not that the enthusiasm comes out? But right now, it's it's kind of viewed as very speculative and very, you know, potential for very high returns, do you think it's going to kind of normalize a little bit and, and get, basically, you know, normal ranges of returns, you know, what hasn't helped any of us is the fact that these companies could go public on the Canadian exchange, right. And I understand why they did it, they needed capital to expand, they were trying to, you know, Cresco labs started in Illinois with me, I mean, they were not in cannabis before that, but they had access to capital pretty quickly. And so they they got set up in Illinois did a really good job, then they started moving and acquiring and other states or applying for licenses. And, you know, you if you have to have a war chest, basically to go that fast. So they went public on the Canadian exchange, because the US stock exchange wouldn't allow it. And so they end up with this big war chest. Well, now they have to quarterly you know, say, what, what is your top line revenue, so they were just gobbling up companies. And the problem was, they weren't able, they weren't, you know, able to get companies that were well run, and had great employees and a deep bench, you know, these were all people just trying to get up and operational. So they ended up with, you know, 10 states of like broken toys, and then they're, you know, and they've got a New York office is expensive, and they've got board members they're paying a lot of money for and, you know, they just kind of acted like big shots way too soon. And some of them have done okay. Others just really blew it, in my opinion, like, they blew too much money. And the stock prices went crazy in the beginning, you know, it was like crypto, like, everybody's like, Oh, I just gotta get some. So it was way too hot. And then it it fell back to a normal rate. Well, this past year, you know, stock prices have been punished overall, and cannabis is even more so because it's, you know, a heavily regulated regulated market. So I think you'll see it, you know, if safe banking would pass I think you're going to see though

50:00

stock shares in the well run companies come back up. And again, I think I think they're moving offshore. I think they're looking to, you know, Mexico or South America or Germany, you know, to start planting some flags, you know, if the US stock market would would take some of this business, I think that you'll see, you know, a huge influx again. Yeah, because we are, we are the world's capital market, no doubt about. Yeah. So it'll, it'll get there. It'll get, you know, it's still nascent. I mean, this is early days in cannabis, for sure. Absolutely. And to be vertically integrated. I mean, that's a that's a choice as well. I mean, for me, it seems like you know, you've got a very complicated business, when you think about, you know, growing distribution, the whole ball of wax, its manufacturing you, you guys have got to be masters of many games in order to do well, that's right. I mean, it is great being vertically integrated. Because, you know, when you first open, you have product to supply yourself, and the people who didn't work, it's awful, and you're gonna see it again, in February, when we go rec,

51:14

there's going to be such demand for the product, that a lot of these little independent dispensaries that aren't associated with cultivation, are going to be out of product and you know, matter of days, and then you're sitting there waiting, waiting, waiting, and you don't want to lose your customers to another dispensary. So they're everyone's nervous, you know, our phone is ringing with a lot of independence, wanting to make sure that they can get supply when they need it. So you know, that makes us nervous, we got to go get more money and build more capacity.

51:47

So, you know, it's all it's all good problems to have. But well, it's gotta be it's gotta be interesting, because I'm sitting here thinking that, you know, you're you are widely recognized as a marketing genius. And you've, you've done some things that few people in marketing have done over the years. And now here you are, in a business that you can't pull a lot of the traditional marketing levers, you got to do things differently than you did in the past. It's gotta be a fascinating journey to be on. It is but you know, honestly, I think with that being my wheelhouse, you know, people who do go into our store, say, you know, what you said how the brand is very strong, and just the shield that you get,

52:30

you know, not everybody spent that kind of time and attention, but I know that for the long haul, you know, you can ultimately get there. But if you start there and stay true to your word, it's got a lot more power, and the fact that we can't use a lot of the the normal marketing tools, you have to be more creative. You know, one of the things that gives us a good reputation is the quality of our products. And, you know, it's interesting in that you would think, well, you know, cannabis flowers, cannabis flower, it is not, and we have prided ourselves in having great, you know, careful growers that know what they're doing. And, and we get that feedback, you know, there's this social media, Reddit channel that you will know, in a New York second, if you've got a good strain on your hands, or a bad strain, you know, they let you have it if they don't like something, or, you know, they think that, you know, the quality isn't there for the price. So, all of that is part of marketing. And, you know, we are fortunate that we have a great team that's, you know, putting out quality product all the time.

53:45

Well, Mitch, born and raised on on a farm, right in the farming community, or back in, in many regards in the farming business in that I always say my grandfather would be so proud of me.

54:00

I'll bet I'll bet it's, it's fascinating. And ultimately, do you guys think about you think BeLeaf will become a public company? Do you think that's, that's where you guys are ultimately headed? I don't think public you know, we may expand if there's other states in the southeast that are similar to you know, our market, like, we're not gonna go jump into New York and fight for, you know, something there or New Jersey. But you know, there are still some states in the southeast that would be worth participating in Texas as obviously, you know, a jewel that everybody's looking at because it's just such a big state. But, you know, we really are trying, a lot of people ask us this, especially people that are going to invest what what is the exit strategy here, like what are you planning to do, and we are building a company to last and whether that's under

55:00

Our ownership or someone else's, we realize how important it is that if a bigger entity comes to by us, we still have to be self sustaining. You know, we still have to make sure we're low cost producers that we're profitable, that our staff is all, you know, operating under the same strict SOPs. So we're building a company to last, whether it's just for the BeLeaf Company, or it's for someone else, you know, to pluck us out and make us part of a bigger organization.

55:33

I love it, building a company to last that's phenomenal. Well, you're certainly have have got a brand that is is definitely got a unique identity and is very easy to see. And the quality of the product, as you spoke to earlier is certainly going to help guarantee its its future. Have you have you been to the SWADE dispensary on Delmar? I have not yet no. So that's one we're really proud of it was a historical church. That was literally for the past 15 years, you know, the roof had fallen in there were homeless people living in it, it was disastrous. So when we got the license on Delmar, we approached Joe, and he was willing to invest in the structure the white box to bring it back. Now working on a historical building was new for me.

56:34

We had to get approval from the State Historical Society and the Federal Historical Society. I call them hysterical society.

56:45

When we said we're going to put a cannabis dispensary in this church,

56:51

it was pretty funny, but that it is stunning that it has been completely rebuilt, new roof, all new tuckpointing on the brick, new stained glass window. And it is it is just such a beautiful structure. And the upstairs, we have the whole first floor. The upstairs is, you know, the big vaulted ceiling. And, you know, we have an option on that space that if we wanted to create an event space we could and being right across the street from the pageant. You know, we have a lot of people that come, Chris Rock showed up like a month ago,

57:31

because he was touring there.

57:35

So, you know, it's the look, each location is different. But you know, and it has the same look and feel. But you know, we think that's a really special one. I will definitely make a trip down there to see that. So I get down there quite often. So I'll I'll go take a look good, outstanding. Well, if people would like to learn more, where would you direct them to go?

57:58

Um, I would say SWADE Cannabis, Swadecannabis.com That is our retail locations. And then BeLeaf Co if anybody's interested in work, I mean, we've always got positions open BeLeafco.com, you'll find open positions on our website. And that's for all divisions for the displays for all the visits. BeLeaf is the parent company. And you know, each of our entities have their own branding. So BeLeaf Company is the parent organization. Do you guys expect BeLeaf to be statewide?

58:36

So so you can only the same ownership group can only have five dispensaries. Now, I guess under under the adult use, we could have more than that. So there would be an interest in adding you know, more retail, but we sell wholesale. So all of our products are sold throughout the state. And there's right now about 200 dispensaries, and there'll probably be another 150 or so added over the next couple of years. So yes, we like having our products in everyone else's dispensary as well. Can you sell across state lines to other dispensaries in other states? No, that's where the feds come in and say, you know, unless they unless they would permit that, which we don't think they will. You know other because if they did that Philip Morris is just going to come dump down in you know, in Southern Illinois, and they'll supply it for the whole country. And we're all kind of hopeful that doesn't happen in our lifetimes. I mean, it ultimately will. I think you're gonna see probably two different paths that cannabis takes one will be a strictly pharmaceutical path, because they're sharpening their knives to get in, they know it works. And then you're going to see a recreational path where you will have the cigarette companies alcohol, tobacco, you know that that will get in. So this is kind of a nice period of time where mom and pops can participate in.

1:00:00

We had this just charming couple on the western side of the state that had been pharmacists for many years. And, you know, independent pharmacies are really struggling. So they decided to apply for a cannabis license for retail and they got it. And, you know, just love, you know, again, they're working with patients, but they love the opportunity. And I'm happy that, you know, right now mom and pops have the opportunity. Yeah, the old formularies were were, you know, really the hub of a hub of a city in the day. Yes, yes. Yeah. Phenomenal. Well, Mitch, again, we're just honored to have you it's a fascinating business, it's fascinating to talk with you about this business, it's it's amazing the challenges that you guys are facing and and you're doing it so well, it really is coming off beautifully. So and I would just encourage any of your listeners to you know, stop in even though you don't have a medical card now. I mean, if you are interested in getting a medical card stop by any of our dispensaries, and they'll show you how to do it. If you don't you want to wait for adult use just stop in anyway and they can give you details you can see you know where you're going to be able to go in a couple of months. And you know, get to know people.

1:01:16

Outstanding. Well listen, thank you very much for making the time it's been a, it's been an honor and a privilege to talk with you and we wish you guys all the best as you as you continue to grow and flourish in this community. Thank you. We appreciate it. Outstanding.

1:01:32

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