Highlights from the 3rd Annual Cannabis Private Investment Summit Fort Lauderdale 2020

February 11 2020

Mia A. Shark, CEO, XKaliber

Peter R. Classen, Chair, Board of Advisors, XKaliber

Investors and entrepreneurs came together on Tuesday, February 11th 2020 in sunny Fort Lauderdale Florida for the 3rd annual Cannabis Private Investment Summit at the Greenspoon Marder Law Offices.

The conference kicked off with the State of the Industry moderated by Jacques Habra of Noospheric with panelist Matt Ginder, Partner at Greenspoon Marder.

The day started positively with a forward look into the state of regulatory cannabis and the legalization of two new states. The conversation turned to a state by state discussion and flowed freely with questions from the audience primarily around cannabis licenses. In regards to Florida, attendees questioned if limited licensing was constitutional. Matt Ginder suggested that “This is the cloud hanging over the program.” The question of who is going to write and regulate these licenses goes without an answer as the industry evolves. “This industry is like designing, and building an airplane while in flight” he states. Another significant milestone discussed in the legalization of cannabis was the entire country of Mexico being expected to go legal this year, which is a significant event for the cannabis space.

Jaques then turned the conversation over to what are the emerging trends and likely keys to success in 2020, with some great advice for entrepreneurs and investors:

Emerging Trend in 2020:

“It’s the Operators who are being rewarded. Aggregators are not.”

Entrepreneurs should take into consideration:

In an environment showing at least 16% annual market growth, having 12 - 18 months “cash” runway to be able to answer emerging cash needs is necessary.
Management of financials are increasingly important; companies need a sound CFO to track and manage expenses, to stay on top of evolving taxation issues, and to ensure the path to profitability is being followed.
Having a tight timetable for implementation and execution is pivotal in a nascent industry.
For Investors especially, due diligence and portfolio company management should focus on:
How are their companies going to get profitable?
How are they going to capture their market opportunities?
How are they planning to manage the details, in an increasingly complex market setting?
What are the resources required to become a 20% market stakeholder?

Emerging Trend in 2020:

“CBD is becoming the gateway drug to Cannabis.” This year we may fully expect to see more professional, more substantial new entrants coming into the industry via the CBD route.

Paul King, CEO of Cannaforniaca lead the next discussion: 2020: Which State Holds the Biggest Cannabiz Opportunity? Paul asked the audience: What state do you think has the biggest upside? Florida was the popular shoutout. Paul agreed that Florida has the largest opportunity. TrueLeaf & Curaleaf are profitable because of Florida. Paul predicts that Florida will be legal by 2022 if we get another 350K more signatures on the petition as Florida did not validate the signatures from the first round petition. This should be an easy task to accomplish leading to the legalization of Florida.

Of particular interest is Florida’s approach to licensing. Where in California, there are at least 6,000 operating licenses and maybe as many as 9,000; in Florida there are 22. The scale, sophistication, and capital required to make a plan in Florida is such that only the capable, organized, and determined are entering. The Florida market is expected to develop with a very different character: less fragmentation, less harmful competition, and hopefully, better consumer outcomes.

Moderator Douglas J Hannah of Silverleaf Venture Partners then presented Benefits of an Investment Fund in the Cannabis Industry with panelists John Mazaeakis, Principal at Chicago Atlantic Group LLC, Rob Sechrist the President of Pelorus Equity Group LLC, Doug Watler the Pension Trustee, Broward County Fire Rescue and Mitch Kulick, Partner at FocusGrowth Capital Partners.

Hannah asked: What is the number 1 deterrent from going into the deal? The panel answered if the number of licenses in the state was too high and if they did not have cannabis-friendly banking. Another turnoff is when you start to ask a company for their proformas and documents, they say, we’ll get it to you in 10 days - it a red flag, we’re not looking to babysit. If we couldn’t get comfortable with the reporting - what is it going to be like to work with this company down the road, how am I ever going to get comfortable? Another concern was if the team turnover is high, one needs to look more closely for underlying operational issues.

Hanna then asked a controversial question: What do you think is fair compensation for Executives - how do you evaluate?

We don’t like if they’re not taking a salary - Being paid a living wage of between $120K - $180K range seems to be appropriate for a company that is trying to attract capital, but this also depends on their region. We want the entrepreneur to be hungry, but not starving. “If the executive is fully vested in the company and the company’s growth is capitalized, $0 is preferred in my case,” said John Mazarakis of Chicago Atlantic Group LLC which received plenty of laughter.

After discussing investment funds, moderator Bill Brothers, President of Towers Investment Trust hosted Cannabis Valuations and Sourcing Early Stage Deals with panelists Michael Apstine, Founding Partner of Primary Growth Partner, Michael Scott, Founder & CEO, Cannapreneur Partners and Christopher Marrie, Partner, HPK CPAs & Consultants. The group discussed where early-stage investors are finding investments: law firms, professional services within the industry and industry conferences. “It’s all about relationships” was a key takeaway.

The panel of power players then discussed what makes an investment a “NO GO” versus a “GO.”

No Go’s included “If you don’t know your numbers and can’t put together credible financial statements and you cannot tell your story, you are going to be out of luck.” stated Marrie. A lot of companies also try to be a lot of things - full vertical integration plays - that are now proving to be exceedingly difficult to execute. The advice: Understand your core competency and stick to it.

On the more optimistic side, Michael Scott asks “Is the operator really an operator? Can they actually execute, can they execute with excellence? ... Emotional intelligence is also important.” Scott stated that he doesn't put too much emphasis on companies being post revenue and believes the most important aspect is the TEAM. On the operational side, he asks do they have the expertise? Are they attracting good people? Another fun antidote worth mentioning comes from Scott and got hoots from the audience “Being in cannabis is like you are running a marathon up a mountain in ice, you can't buy supplies because they are illegal, and people are judging you for running that race.”

The conference then moved onto the Invest Pitch Session judged by Avi Weintraub of CannaVest LLC, Christopher Akelman, Fireman Capital and Andrew Septimus, Principal, 7Lox. The winner of the Investment Pitch Session was Shryne Group.

After a wonderful lunch provided by GreenspoonMarder, a discussion of Medical Cannabis and CBD was moderated by Michael J Wilner, Present and CEO of Wilner Capital Inc with panelists of Joseph Rosado MD, MBA, Patrick

Horseman, President and CEO of Integrated CBD and David L Nathan, MD DFAPA, Princeton Psychiatry & Consulting LLC.

The discussion revolved around the use of cannabis in a medical application. Topics discussed included regulation in different states, the liability of practitioners prescribing THC and CBD for medical use is challenging based on the inconsistent quality of products available and budtenders with a lack of consistency. The consensus is that more education and research is absolutely required.

Following the discussion on Medical Cannabis & CBD, the keynote Andreas Bodmeier, Principal, Chicago Atlantic Group LLC. presented Raising Debt in the Current Downturn. Bodmeier states that family offices are stockpiling cash these days and jokes that “It’s all Canada’s fault as fast as capital went in, it went right back out.”

Positioned to Win: Investment 101 for Family Offices following the Keynote moderated by Todd Rosales, of Cooper Family Office, Kevin McGovern, of McGovern Capital, JJ Sowers, Director of Sowers Family Investments and Matt Hawkins, Management partner of Entourage Effect Capital weighed in on why family offices are best positioned to win in this phase of the cannabis industry. The consensus was the next phase of Cannabis investing for family offices should be in a specific industry vertical - do what you do best and stay there, if you have experience and knowledge in an area, stick to what you know.

Garyn Angel, founder of Magical Butter then presented Are Psychedelics the Next Big Thing? Well, he seems to think so! We’re inclined to agree that there are some indications around microdosing that provide a great advantage to those suffering from a vast array of mental illness.

The psychedelic found in mushrooms, psilocybin, allows you to dig deeper than the surface of the root of the problem, unpacking the issues, deal with them and be truthful with yourself around the problem and move on suggest Angel. As of current, the federal regulations are favorable and the future looks bright for psilocybin.

Bruce Linton, Ex-Canopy CEO, Founder of Viero Health Entrepreneur, Investor, and Business Leader then presented his 2020 Vision with a bit of 2020 Hindsight. The key piece of advice that Linton had for investors and entrepreneurs was that expanding into Europe is going to be the best place to get deals done.

Al Harrington former MBA player and founder of Viola Brands and Calyn Ostrowski closed the day with favorite topics including Sports, CBD and Social Equality in a Deep Dive with Al Harrington on Sports, CBD, and Social Equity. Al told a heartfelt story about his introduction into cannabis to open up the discussion. Al says, his grandmas had been suffering from various illnesses including glaucoma and was on a copious amount of pharmaceutical drugs. When she tried marijuana she felt so much better, she could finally read her bible again. The story was genuine and heartfelt.

Calyn asked Al “Why is social equity important to you”. Al responded that it was a maturation process - when he first started in cannabis he didn't know what he was doing, but he put up all his own money, and started in Colorado creating opportunities for black and brown people to participate in the space. The final surprise speaker Marvin Degon an American professional ice hockey defenceman weighed in on the benefits of cannabis with another emotional story about how cannabis saved his life, closing the conference on a hopeful note.

The day concluded with a networking cocktail reception graciously provided by GreenspoonMarder.

The Cannabis Private Investment Summit Series showcases the best and brightest cannabis entrepreneurs and is the premiere summit for institutional investors, family offices, and ultra high net worth investors. For additional information, please email us at info@kahnerglobal.com.