ValueWalk’s Q&A session with Cannabis One’s Director and Chairman Jeffery Mascio, discussing Cannabis One’s business model, the Controlled Substance Act, the legality of CBD/hemp vs. cannabis, the global growth picture for cannabis, and the difference between CBD and THC.
Q: Can you tell us about your background?
I have spent the better part of the last two decades in the US financial services industry. I started my career with Merrill Lynch in Denver, CO as a financial advisor. However, my real interest was always in asset management, and in 2005, I founded Meridian Capital, a private equity firm. My entrance into the cannabis space was in 2015 when Meridian Capital launched Bertram Capital Finance, a hedge fund founded to fund the new cannabis industry. Today, Bertram Capital Finance, Inc. is now Cannabis One, a wholly owned subsidiary of Cannabis One Holdings Inc, and is publicly traded on the CSE under the ticker symbol CBIS:CNX.
Q1 hedge fund letters, conference, scoops etc
Q: What does Cannabis One do?
Cannabis One is positioning itself to be a premier “House of Brands”, aggregating and optimizing existing North American cannabis brands. We take advantage of unique opportunities in developing a significant market presence through targeting of and acquiring legacy cannabis assets at discounted valuations. We then bring “Big Box Brand” operational experience along with our size and scale to enhance and grow our market presence.
Q: How do you navigate the different federal and state laws regarding cannabis products?
The legal and regulatory landscape is one of the biggest challenges within the industry. Each state and local jurisdiction has differing rules to follow. We try to streamline certain processes as much as possible, then rely on state by state legal counsel to review compliance.
Q: Does the SEC or FINRA have guidelines on what asset managers can or cannot buy?
The SEC and FINRA have published multiple industry guidelines for investing in cannabis. More accurately, the SEC has released several cautionary alerts for investors looking to invest in cannabis pointing to the few safeguards in place to ensure the accuracy of what information is available. The cannabis sector up to this point is largely populated by smaller companies that are subject to less stringent disclosure requirements by the SEC, and most operate under one or more exemptions to registration. Moreover, due to the size of most cannabis companies as well as cannabis’s current schedule one status under The Controlled Substance Act, most cannabis operators are barred from being traded on major stock exchanges, such as the New York Stock Exchange, and instead are traded on the less-regulated over-the-counter stock markets or, as in Cannabis One’s case, listing on foreign exchanges such as the Canadian Securities Exchange (CSE).
Q: Are the big alcohol or tobacco companies making gains in this new industry?
Alcohol and tobacco companies see the value in cannabis as they continue to lose consumers to this newly legalized product. Big pharma also has its sights set on the industry, setting up potential consolidation once federal regulations change.
Q: Every time there is a new gold rush a lot of unscrupulous people get involved – this appears to be the case with cannabis. How do you avoid getting involved with questionable companies?
Unfortunately, these players are most definitely involved in the cannabis space. We have learned through experience that any new potential partners or business interests must be thoroughly vetted, and we rely upon thorough due diligence to avoid these types as much as we can.
Q: What exactly is CBD?
Cannabidiol (CBD) is one of the 117 endocannabinoids within the cannabis plant. It has been shown to be helpful in the treatment of certain types of epilepsy and seizure disorders, as well as having therapeutic effects in pain, migraines and anxiety, and is showing promise in having antibacterial properties.
Q: Can you give us some history on the legality of CBD/hemp vs. cannabis in the United States?
Cannabis became a Schedule I controlled substance in 1970 upon the passage of the Controlled Substance Act. Cannabis is still today listed as a Schedule I substance, but the 2014 Farm Bill allowed for the study and limited use of hemp derived CBD federally. The 2018 Farm Bill further broadened the scope of protections for hemp farmers including several provisions of agricultural law to include hemp. Under the 2018 Farm Bill, hemp is treated like other agricultural commodities in many ways such as having protections under the Federal Crop Insurance Act. In contrast to CBD, no exceptions have been to the status of THC under the Controlled Substance Act. The laws at the state level differ greatly and, in many cases, contradict the federal Controlled Substance Act.
Q: How is CBD different than THC?
Both are endocannabinoids, but they affect our bodies in different ways. CBD acts primarily at on the Cannabinoid Type 2 (CB2) receptors in the body and is non-psychoactive, meaning you don’t get a “high” from it. THC (tetrahydrocannabinol) in contrast acts at both the Cannabinoid Type 1 (CB1) & Type 2 (CB2) receptors and is psychoactive due to its strong activity in the brain on the C1 receptors, as it gets a person ‘high” and produces a sense of euphoria.
Q: What does the global growth picture for cannabis look like, and how does that differ from just the US?
With growing acceptance and popularity of cannabis socially, as well as the many therapeutic benefits that we are just starting to study, the world growth potential of the cannabis industry has been estimated as high as $100 billion. Interestingly, the US, having very restrictive federal laws governing cannabis, has been lagging the worlds growth in cannabis. However, with 11 states and the District of Columbia having moved to legalize recreational cannabis, we believe the restriction on the US cannabis industry federally is ripe for change. In fact, today 62% of American’s support the legalization of cannabis for recreational use compared to 31% in 2000.
Q: What do you foresee in the future for the cannabis industry in America?
With a more that 60% of Americans now supporting the legalization of cannabis for recreational use, it is fair to expect the legal framework to follow the desires of the American people. As such, the explosive growth that has been largely diffused by federal law is likely to be unleashed in the months to come as federal prohibition on cannabis is abolished.
Q: What moves do you think federal lawmakers should be making about cannabis right now?
The federal government seems to clearly be moving towards some type of legalization at a federal level, which is exactly as it should be doing. The people have spoken, and the wave of legalization continues to grow. It will be interesting to see how the laws change and the following impact on the individual state’s laws. It will obviously take time for true interstate commerce to begin, but we are preparing ourselves for that eventuality.
